Bosch - 1QCY2012 Result Update - Angel Broking

Bosch (BOS) reported better-than-expected operating performance for 1QCY2012 aided by EBITDA margin expansion on account of cost rationalization and localization benefits. We revise upwards our earnings estimates for CY2012E/13E, primarily on account of upward revision in our EBITDA margin estimates. We maintain our Accumulate rating on the stock.

Strong performance boosted by operating margin expansion: BOS registered healthy top-line growth of 10% yoy (12.5% qoq) to Rs.2,295cr, in-line with our expectation, primarily driven by ~15% and ~16% yoy growth in the after-market and power tools segments, respectively. While the diesel systems segment reported ~8% yoy growth, the gasoline systems segment registered flat growth on account of slowdown in the passenger car industry (petrol variants). Exports also grew at a sluggish pace of ~3% and stood at Rs.250cr mainly on account of slowdown in Europe. The company posted better-than-expected EBITDA margin of 20.8%, registering an increase of 192bp yoy (331bp qoq), mainly on account of a decline in raw-material expenses. Raw-material expenses as a percentage of sales declined by 170bp yoy (54.6% of sales), led by cost savings due to localization benefits, strategic buying decisions carried out by the company and cost-cutting measures. As a result, net profit registered strong 22.4% yoy (19.5% qoq) growth to Rs.336cr.

Outlook and valuation: We expect BOS to register a ~15% CAGR each in its net sales and earnings over CY2011-13E, leading to EPS of Rs.420.2 and Rs.471.4 for CY2012E and CY2013E, respectively. At Rs.8,781, the stock is trading at 20.9x CY2012E and 18.6x CY2013E earnings, respectively. We retain our Accumulate rating on the stock with a target price of Rs.9,429, valuing the stock at 20x its CY2013E earnings.

Source : Equity Bulls

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