Bajaj Electricals - 4QFY2012 Result Update - Angel Broking

Bajaj Electricals (BEL) posted modest top-line growth of 8.2% yoy to Rs.1,060cr in 4QFY2012. The company's OPM for the quarter fell by 225bp yoy and declined by mere 3bp qoq to 8.1%. PAT for the quarter came in at Rs.49cr, down 14.7% yoy. We recommend Buy on the stock.

Top-line growth driven by the lighting and consumer durables segments: The lighting segment witnessed 23.1% yoy growth in revenue to Rs.248cr and the consumer durable segment managed 10.4% yoy growth in revenue to Rs.444cr. The engineering and projects (E&P) segment, however, witnessed a decline of 2.2% yoy in revenue to Rs.368cr. The company's operating profit declined by 15.3% yoy to Rs.86cr, largely due to margin compression. OPM fell by 225bp to 8.1%, mainly because of higher-than-expected other expenditure. The lighting segment witnessed a 140bp yoy increase in EBIT margin, while the consumer durable segment witnessed a 199bp yoy contraction in EBIT margin. The E&P segment reported EBIT of Rs.21cr, down 48.2% yoy, while its margin declined by 497bp yoy to 5.6%, consequently bringing down the margin for the whole company. The company's PAT for the quarter came in at Rs.49cr, down 14.7% yoy.

Outlook and valuation: We believe consumer appliances and new product launches will fuel growth going ahead. Further, we expect the company's 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 16.0% over FY2012-14E. We expect adjusted PAT to register a CAGR of 37.0% to Rs.221cr over FY2012-14E. With the recent sharp correction, the stock is available at attractive valuation of just 8.8x FY2014 earnings, against its five-year historical average of 11x one-year forward earnings. We recommend Buy on the stock with a target price of Rs.246, valuing the stock at 11x FY2014 earnings.

Source : Equity Bulls

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