BOSCH - 3QCY2012 Result Update - Angel Broking

Bosch (BOS) reported a poor performance for 3QCY2012 due to a sequential decline in the operating margin (down 182bp) led by a sequential decline in the top-line and lower operating leverage benefits. We revise our earnings estimates downwards (by 4.7%/4.2% in CY2012E/13E) to factor in the slowdown in the automotive sector and weak exports demand coupled with margin pressure due to unfavorable currency movement. We maintain our Neutral rating on the stock.

Poor performance for 3QCY2012: BOS posted a sluggish growth in net sales of 3% yoy (down 5.6% qoq) to Rs.2,052cr, broadly in-line with estimates, on account of continued weakness in medium and heavy commercial vehicle (MHCV) and tractor sales. The automotive segment posted a subdued growth of 1.6% yoy (down 5.7% qoq) due to marginal decline in diesel system sales and 17.6% yoy decline in exports revenue. The non-auto segment too registered a moderate growth of 7.6% yoy (down 7.3% qoq) during the quarter. The EBITDA margin declined 182bp sequentially to 13.3% primarily due to decline in top-line and lower operating leverage benefits. As a result employee and other expenditure as a percentage of sales increased by 60bp and 90bp respectively (though constant in absolute terms). On a yoy basis, margins contracted steeply by 600bp due to INR depreciation which resulted in a 342bp increase in raw-material cost as a percentage of sales. Further, other expenditure too witnessed a 170bp yoy expansion during the quarter. As a result, the operating profit declined 29% yoy (17% qoq) to Rs.273cr. The net profit too declined 29.6% yoy (18% qoq) to Rs.203cr.

Outlook and valuation: While we are positive on the long term prospects of BOS due to its technological leadership and strong and diversified product portfolio; we expect the near-term environment to remain challenging for the company given the slowdown in the MHCV and tractor industry. At Rs.8,859, BOS is fairly valued at 21.2x CY2013E earnings. We maintain our Neutral rating on the stock.

Source : Equity Bulls

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