Bajaj Electricals - 1QFY2013 Result Update - Angel Broking

Bajaj Electricals (BEL) reported strong top-line growth of 22.4% yoy to Rs.666cr in 1QFY2013. The company's OPM for the quarter fell by mere 35bp yoy to 5.2%. PAT for the quarter came in at Rs.12cr, up 8.4% yoy. We recommend Buy on the stock.

Top-line growth driven by the lighting and consumer durables segments: Their lighting segment witnessed 19.6% yoy growth in revenue to Rs.152cr (Rs.127cr), while their consumer durable segment grew strongly by 28.8% yoy growth in revenue to Rs.390cr (Rs.303cr). Their Engineering and projects (E&P) segment witnessed an increase of 8.4% yoy in revenue to Rs.123cr (Rs.114cr). Operating profit increased by 14.7% yoy to Rs.35cr (Rs.30cr) largely due to higher top-line which was somewhat offset by margin compression. OPM fell by 35bp to 5.2% (5.5%). Lighting segment witnessed a 98bp yoy decline in EBIT margin to 4.8% while their consumer durable segment witnessed 123bp yoy contraction to 8.4%. Their E&P segment reported an EBIT loss of Rs.7cr, consequently bringing down margins for the whole company. PAT came in at Rs.12cr up 8.4% 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 price increase across segments. The company has increased prices in July and plans one more price increase in August. Overall, we expect the company to post a topline CAGR of 16.0% over FY2012-14E. We expect adjusted PAT to register a CAGR of 33.8% to Rs.221cr over FY2012-14E. With the recent sharp correction, the stock is available at attractive valuation of just 8.1x 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.234, valuing the stock at 11x FY2014 earnings.

Source : Equity Bulls

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