bajaj electricals result updated

8/3/2019 Bajaj Electricals Result Updated

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Please refer to important disclosures at the end of this report 1

Y/E March (` cr) 3QFY12 2QFY12 % chg (qoq) 3QFY11 % chg (yoy)Net sales 794 701 13.2 690 15.1EBITDA 65 53 23.3 71 (8.6)

EBITDA (%) 8.2 7.5 66bp 10.3 (212)bp

PAT 32.8 25.0 31.4 40.6 (19.1)Source: Company, Angel Research

Bajaj Electricals (BEL) posted strong top-line growth of 15.1% yoy to `794cr

(`690cr) in 3QFY2012. The companys OPM fell by 212bp yoy but improved by

66bp qoq to 8.2%. PAT for the quarter came in at `33cr (`41cr), down 19.1%yoy. We recommend Buy on the stock.Top-line growth driven by the lighting and consumer durables segments: BELssales grew by 15.1% yoy due to strong performance by the lighting and consumer

durables segments, which grew by 18.8% and 24.7%, respectively, while the E&P

segment witnessed a decline of 5.1% yoy. The companys OPM declined by

212bp yoy to 8.2% (10.3%) due to increased other expenditure. Despite a 212bp

OPM contraction, PAT margin declined by 175bp yoy to 4.1% (5.9%), owing to

higher other income, which increased by 204% yoy to `2cr. PAT for the quarter

came in at `33cr, down 19.1%. Going ahead, we expect the companys margin

to improve from these levels on the back of easing commodity prices and closureof lower-margin E&P projects.

Outlook and valuation:We expect the trend of strong top-line growth to continuegoing ahead as well. Further, we expect the companys margin to improve from

these levels on the back of easing commodity prices and closure of lower-margin

E&P projects. Overall, we expect the company to post a top-line CAGR of 15.7%

over FY201113E. We expect adjusted PAT to register a CAGR of 18.5% to

`183cr over FY201113E. With the recent sharp correction, the stock is available

at attractive valuation on just 9.3x FY2013 earnings, against its five-year historical

average of 11x one-year forward earnings. We recommend Buy on the stock witha target price of `201, valuing the stock at 11x FY2013 earnings.Key financials

Y/E March (` cr) FY2010 FY2011 FY2012E FY2013ENet Sales 2,227 2,741 3,084 3,670% chg 26.1 23.1 12.5 19.0

Net Profit 112 130 134 183% chg 22.4 16.5 2.9 36.6

EBITDA Margin (%) 10.5 8.7 7.7 8.5

FDEPS (Rs) 11.7 14.7 13.4 18.3P/E (x) 14.6 11.6 12.7 9.3

P/BV (x) 3.4 2.8 2.4 2.0

RoE (%) 31.7 26.2 20.4 23.9RoCE (%) 40.4 33.1 29.2 34.0

EV/Sales (x) 0.8 0.6 0.6 0.5

EV/EBITDA (x) 7.5 7.4 7.4 5.6

Source: Company, Angel Research

BUYCMP `171

Target Price `201

Investment Period 12 Months

Stock Info

Sector

Bloomberg Code

Shareholding Pattern (%)

Promoters 65.6

MF / Banks / Indian Fls 9.4

FII / NRIs / OCBs 7.4

Indian Public / Others 17.5

Abs.(%) 3m 1yr 3yr

Sensex 2.7 1.4 86.0

Bajaj Electricals (11.4) (16.8) 328.7

BJE@IN

Face Value (`)BSE Sensex

Nifty

Reuters Code

217,831

5,412

BJEL.BO

Cons. Durables

Avg. Daily Volume

Market Cap (`cr)

Beta

52 Week High / Low

1,700

0.9

296/133

32,961

Sharan Lillaney+91 22 3935 7800 Ext: 6811

[email protected]

Bajaj ElectricalsPerformance Highlights

3QFY2012 Result Update | Cons. Durables

February 9, 2012


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Bajaj Electricals | 3QFY2012 Result Update

February 9, 2012 2

Exhibit 1:3QFY2012 performance highlightsY/E March (` cr) 2QFY12 1QFY12 % chg (qoq) 2QFY11 % chg (yoy)Net Sales 793.6 700.8 13.2 689.5 15.1Consumption of RM 593.7 520.9 14.0 515.9 15.1(% of Sales) 74.8 74.3 74.8

Staff Costs 34.1 46.3 (26.4) 28.7 19.1

(% of Sales) 4.3 6.6 4.2

Other Expenses 101.1 81.1 24.7 74.1 36.4

(% of Sales) 12.7 11.6 10.7

Total Expenditure 728.9 648.3 12.4 618.6 17.8

Operating Profit 64.8 52.5 23.3 70.9 (8.6)OPM 8.2 7.5 66bp 10.3 (212) bpInterest 15.2 12.8 18.2 9.3 63.9

Depreciation 2.9 2.9 (1.4) 2.7 8.3

Other Income 2.1 0.7 200.0 0.7 204.3

PBT (excl. Extr. Items) 48.8 37.5 30.3 59.6 (18.1)Extr. Income/(Expense) - - -

PBT (incl. Extr. Items) 48.8 37.5 30.3 59.6 (18.1)(% of Sales) 6.2 5.3 8.6

Provision for Taxation 16.0 12.5 28.3 19.2 (16.7)

(% of PBT) 32.7 33.2 32.2

Prior Period Items - 0.0 (0.1)

Adjusted PAT 32.8 25.0 31.4 40.6 (19.1)PATM 4.1 3.6 57bp 5.9 (175)bpEquity shares (cr) 10.0 10.0 9.9

EPS (` ) 3.3 2.5 31.4 4.1 (19.7) Adjusted PAT 32.8 25.0 31.6 40.7 (19.3)


Segment-wise performance

For 3QFY2011, the lighting division posted growth of 18.8% yoy to `200cr

(`168cr). The segment reported higher EBIT of `11.1cr in 3QFY2012 compared to

`7.4cr in 3QFY2011. EBIT margin increased by 119bp yoy to 5.6% (4.4%).

The consumer durables division maintained its strong growth momentum, with

sales increasing by 24.7% yoy to `414cr (`332cr). EBIT for the segment came in at

`46cr, implying an EBIT margin of 11.1% (13.0%), down 185bp yoy.

The E&P segment posted a decline of 5.1% in sales to `179cr (`189cr). EBIT

margin of the segment declined by 582bp yoy during the quarter to 3.6% (9.4%).


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February 9, 2012 3

Exhibit 2:Segment-wise performanceY/E Mar (` cr) 3QFY12 2QFY12 3QFY11 % chg (qoq) % chg (yoy)Total Revenue A) Lighting 200.2 189.2 168.5 5.8 18.8B) Cons Durables 413.8 339.4 331.9 21.9 24.

C) E&P 179.3 171.2 188.8 4.7 (5.1

D) Others 0.3 1.0 0.3 (67.3) 6.3

Total 793.6 700.8 689.6 13.2 15.1

Less: Inter-Segment - - -

Net Sales 793.6 700.8 689.6 13.2 15.1

EBIT Margin (%) A) Lighting 5.6 6.0 4.4(41)bp 119 bp

B) Cons Durables 11.1 9.3 13.0 186 bp (185) bp

C) E&P 3.6 3.8 9.4 (16) bp (582) bp

D) Others 20.6 76.0 40.6 (5,537) bp (2,004) bp


Sales growth comes in at 15.1%

The company has consistently posted strong growth in its sales over the past eight

quarters. In 3QFY2012, the company reported growth of 15.1% yoy. Growth was

backed by strong performance by the consumer durables and lighting segments.

Going ahead as well, we expect sales to continue to report a strong performance.

Exhibit 3:Sales trend


784

484588

690

980

544

701794

0

5

10

15

20

25

30

35

0

200

400

600

800

1,000

1,200

4QFY10

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

(%)

(`

cr)

Sales (LHS) yoy Growth (RHS)


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February 9, 2012 4

OPM remains under pressure, declines by 212bp yoy

OPM declined by 212bp yoy during 3QFY2012 to 8.2%, while it improved by

66bp qoq. EBIT margins of the E&P and consumer durable segments were under

pressure during the quarter and reported a decline on a yoy basis.

Exhibit 4:OPM trend


PAT down by 18.8%

The companys PAT declined by 19.1% yoy to `33cr (`41cr) on the back of OPM

compression in 3QFY2012. Despite a 212bp OPM contraction, the companys PAT

margin declined by 175bp yoy to 4.1% (5.9%), owing to higher other income,which increased by 204% yoy to `2cr.

Exhibit 5:PAT trend


92.3

40.8 44.6

70.9

101.7

30.2

52.5

64.8

0

2

4

6

8

10

12

14

0

20

40

60

80

100

120

4QFY10

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

(%)

(`

cr)

EBITDA (LHS) OPM (RHS)

37

23 23

40

57.5

11.1

25.0

32.8

(60)

(50)

(40)(30)

(20)

(10)

0

10

20

30

40

50

0

1020

30

40

50

60

70

4QFY10

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

(%)

(`

cr)

PAT (LHS) PAT growth (RHS)


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February 9, 2012 5

Investment arguments

Strong brand image Leveraging on strong brands and substantial market share:BEL has a strong brand positioning and a well-spread distribution network. As per

the company's internal estimates, it is the fastest growing player in the domestic

appliances market, which is growing at 20% per year. In the small appliances

market, BEL enjoys a market share of over 15-30% across all product categories.

Future growth drivers Rural markets, acquisitions and newer verticals: BEL plansto capitalize on growth in the rural markets. The company has also identified 7-8

potential acquisition candidates across businesses. Management expects about

15% of future sales to come from the acquired businesses. The company also

plans to foray into newer verticals, including water management, which is an

underpenetrated and rapidly growing market.

Outlook and valuation

We expect the trend of strong top-line growth to continue going ahead as well.

Further, we expect the companys margin to improve from these levels on the back

of easing commodity prices and closure of lower-margin E&P projects. Overall,

we expect the company to post a top-line CAGR of 15.7% over FY2011-13E.

We expect adjusted PAT to register a CAGR of 18.5% to `183cr over FY2011-13E.

With the recent sharp correction, the stock is available at attractive valuation on

just 9.3x FY2013 earnings, against five-year historical average of 11x one-year

forward earnings. We recommend Buy on the stock with a target price of `201,valuing the stock at 11x FY2013 earnings.


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February 9, 2012 6

Profit and loss statement

Y/E March (` cr) FY09 FY10 FY11 FY12E FY13EGross sales 1,788 2,248 2,765 3,111 3,702

Less: Excise duty 23 21 24 27 32Net Sales 1,766 2,227 2,741 3,084 3,670Other operating income - - - - -Total operating income 1,766 2,227 2,741 3,084 3,670% chg 28.0 26.1 23.1 12.5 19.0

Total Expenditure 1,584 1,994 2,503 2,846 3,357

Net Raw Materials 1,315 1,652 2,095 2,338 2,770

Other Mfg costs 92 113 126 160 172

Personnel 77 97 122 154 183

Other 100 131 160 194 231

EBITDA 182 233 238 238 312% chg 27.0 28.0 2.2 (0.2) 31.3

(% of Net Sales) 10.3 10.5 8.7 7.7 8.5

Depreciation& Amortisation 9 9 11 13 16

EBIT 173 224 227 225 297% chg 27.7 29.1 1.6 (1.2) 32.1

(% of Net Sales) 9.8 10.0 8.3 7.3 8.1

Interest & other Charges 41 37 29 29 27

Other Income 10 8 6 8 8

(% of PBT) 7.0 4.3 2.8 4.1 3.0

Share in profit of Associates - - - - -

Recurring PBT 142 195 204 204 278% chg 27.5 37.3 4.5 (0.1) 36.6

Extraordinary Expense/(Inc.) - - (15) - -

PBT (reported) 142 195 219 204 278Tax 51 75 74 70 96

(% of PBT) 35.7 38.6 33.8 34.4 34.4

PAT (reported) 91 120 145 134 183 Add: Share of earnings of associate - - - - -

Less: Minority interest (MI) - - - - -

Prior period items 0 8 - - -

PAT after MI (reported) 91 120 145 134 183ADJ. PAT 91 112 130 134 183% chg 25.5 22.4 16.5 2.9 36.6

(% of Net Sales) 5.2 5.0 4.7 4.3 5.0

Basic EPS (`) 10.3 12.0 14.7 13.4 18.3Fully Diluted EPS ( ) 10.3 11.7 14.7 13.4 18.3% chg 22.8 13.5 25.2 (8.3) 36.6


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February 9, 2012 7

Balance sheet

Y/E March (` cr) FY09 FY10 FY11 FY12E FY13ESOURCES OF FUNDSEquity Share Capital 17 20 20 20 20Preference Capital 2.8 0.2 - - -

Reserves& Surplus 225 475 591 678 810

Shareholders Funds 245 494 611 698 830Minority Interest - - - - -Total Loans 214 152 116 116 106

Deferred Tax Liability (Net) 3 (1) (2) (2) (2)

Total Liabilities 462 646 726 813 934APPLICATION OF FUNDSGross Block 154 170 230 237 282

Less: Acc. Depreciation 60 68 77 90 105

Net Block 95 102 153 147 177Capital Work-in-Progress 2 0 - 2 3

Goodwill - - - - -

Investments 32 37 37 37 37Current Assets 904 1,199 1,575 1,616 1,900

Cash 54 61 48 66 55

Loans & Advances 113 178 167 231 275

Inventories 178 209 295 280 334

Debtors 559 751 1,065 1,039 1,236

Other - - - - -

Current liabilities 570 692 1,039 990 1,182

Net Current Assets 333 507 536 627 718Mis. Exp. not written off - - - - -

Total Assets 462 646 726 813 934


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February 9, 2012 8

Cash flow statement

Y/E March (` cr) FY09 FY10 FY11 FY12E FY13EProfit before tax 140 201 219 204 278

Depreciation 9 9 11 13 16(Inc.)/ Dec. in Working Capital (12) (192) (64) (89) (108)

Less: Other income 10 8 6 8 8

Direct taxes paid 51 75 74 70 96

Cash Flow from Operations 76 (66) 86 49 81(Inc.)/ Dec. in Fixed Assets (13) (13) (60) (9) (45)

(Inc.)/ Dec. in Investments (9) (5) (0) - -

(Inc.)/ Dec. in loans and adv. - - - - -

Other income 10 8 6 8 8

Cash Flow from Investing (12) (10) (54) (1) (37)Issue of Equity (0) 163 - - -

Inc./(Dec.) in loans (23) (62) (35) - (10)

Dividend Paid (Incl. Tax) 20 27 42 47 51

Others 1.0 9.4 32.2 16.0 6.1

Cash Flow from Financing (42) 83 (45) (30) (55)Inc./(Dec.) in Cash 22 7 (13) 18 (11)

Opening Cash balances 32 54 61 48 66Closing Cash balances 54 61 48 66 55


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February 9, 2012 9

Key ratios

Y/E March FY09 FY10 FY11 FY12E FY13EValuation Ratio (x)P/E (on FDEPS) 16.6 14.6 11.6 12.7 9.3P/E (on basic, reported EPS) 16.5 14.2 11.6 12.7 9.3

P/CEPS 15.1 13.2 10.8 11.6 8.6

P/BV 6.0 3.4 2.8 2.4 2.0

Dividend yield (%) 1.2 1.4 2.1 2.3 2.6

Market cap. / Sales 0.8 0.7 0.6 0.6 0.5

EV/Sales 0.9 0.8 0.6 0.6 0.5

EV/EBITDA 9.0 7.5 7.4 7.4 5.6

EV / Total Assets 3.5 2.7 2.4 2.2 1.9

Per Share Data (Rs)EPS (Basic) 10.3 12.0 14.7 13.4 18.3

EPS (fully diluted) 10.3 11.7 14.7 13.4 18.3

Cash EPS 15.1 13.2 10.8 11.6 8.6

DPS 10.0 2.4 3.6 4.0 4.4

Book Value 28.3 50.7 61.8 70.2 83.4

Dupont Analysis (%)EBIT margin 9.8 10.1 8.3 7.3 8.1

Tax retention ratio 77.3 81.3 75.4 70.2 76.0

Asset turnover (x) 4.5 4.5 4.3 4.3 4.5

ROCE (Post Tax) 33.9 36.9 27.2 22.1 27.7

Cost of Debt (Post Tax) 11.7 12.7 14.3 16.4 15.6

Leverage (x) 0.7 0.3 0.1 0.1 0.1

Operating ROE 50.4 43.0 28.8 22.6 28.5

Returns (%)

ROCE (Pre-tax) 39.5 40.4 33.1 29.2 34.0

Angel ROIC 34.0 36.7 27.2 22.2 27.8

ROE 42.6 31.7 26.2 20.4 23.9

Turnover ratios (x) Asset Turnover (Gross Block) 11.8 13.7 13.7 13.2 14.1

Asset Turnover (Net Block) 19.0 22.7 21.5 20.5 22.6

Operating Inc. / Invested Capital 4.0 4.0 4.0 4.0 4.2

Inventory / Sales (days) 35 32 34 34 31Receivables (days) 102 107 121 125 113

Payables (days) 113 115 126 130 118

WCcycle (ex-cash) (days) 57 59 62 62 61

Solvency ratios (x)Gross debt to equity 0.9 0.3 0.2 0.2 0.1

Net debt to equity 0.7 0.2 0.1 0.1 0.1

Net debt to EBITDA 0.9 0.4 0.3 0.2 0.2

Interest Coverage (EBIT / Interest) 4.2 6.0 7.8 7.7 11.2


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February 9, 2012 10

Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com

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Disclosure of Interest Statement Bajaj Electricals

1. Analyst ownership of the stock No

2. Angel and its Group companies ownership of the stock No

3. Angel and its Group companies' Directors ownership of the stock No

4. Broking relationship with company covered No

Ratings (Returns): Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)Reduce (-5% to 15%) Sell (< -15%)

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bajaj electricals result updated

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