Bosch - 4QCY2012 Result Review - Angel Broking

Bosch (CMP: Rs. 8,862/ TP: Rs. 9,570/ Upside: 8%)

Bosch (BOS) reported poor results for 4QCY2012 largely due to contraction in operating margins which declined 82bp sequentially (429bp yoy) to 12.5%. Topline posted a subdued growth of 5.1% yoy (3.8% qoq) to Rs. 2,132cr, which was slightly below our expectations of Rs. 2,202cr. The poor performance can be attributed to the weakness in the medium and heavy commercial vehicle (MHCV) and tractor industries which are the key drivers of the company's performance.

While the automotive segment posted a growth of 3.9% yoy (4.7% qoq) due to slowdown in OEM sales; non-auto segment registered a 6.2% yoy (down 2.7% qoq) growth. On the operating front, EBITDA margin declined by a sharp 429bp yoy to 12.5% primarily on account of increase in raw-material costs and employee expenditure. The raw-material cost as a percentage of sales surged 140bp yoy on account of INR depreciation; while, employee expenditure as a percentage of sales jumped 290bp yoy due to negative impact of change in actuarial assumptions and wage hikes given to the employees. On a sequential basis, the margins were impacted largely due to increase in employee and other expenditure which grew by 18.7% and 27.1% qoq. Therefore, net profit at Rs. 172cr (down 38.8% yoy and 15.2% qoq) was lower than our expectations of Rs. 199cr. The net profit performance was further impacted due to high depreciation expense (up 33.7% yoy) and higher tax rate (29.7% vs 22.5% in 4QCY2012).

At the CMP of Rs. 8,862, the stock is trading at 19.4x CY2014 earnings. We maintain our Accumulate rating on the stock with a target price of Rs. 9,570.

Source : Equity Bulls

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