Bosch - Q1FY2014 Result Review - Angel Broking

Bosch (BOS) reported broadly in-line results for 2QCY2013. While top-line grew at a better-than-expected rate of 5.9% yoy (4.4% qoq); EBITDA margins continued to remain under pressure (down 155bp sequentially) resulting in a muted growth in the bottom-line.

For 2QCY2013, top-line posted a healthy growth of 5.9% yoy (4.4% qoq) to Rs. 2,307cr, ahead of our estimates of Rs. 2,188cr, driven by a strong exports growth of 14.1% yoy. Domestic markets however, reported a modest growth of 3.8% yoy as domestic automotive demand continued to remain weak following challenging macroeconomic environment. On the operating front, EBITDA margins declined 155bp sequentially to 15.7%, lower than our expectations of 16.8%. The performance was impacted due to the INR depreciation against the EUR and also due to increase in staff expenditure on account of annual salary hikes. Consequently, operating profit declined 4.9% qoq to Rs. 363cr, in-line with our estimates of Rs. 367cr. On a yoy basis though, EBITDA margins improved 65bp primarily on account of softening of raw-material prices and decline in other expenditure (aided by cost reduction initiatives) offset by sharp increase in employee expenditure and unfavorable currency movement. Net profit for the quarter stood at Rs. 252cr (up 1.7% yoy but down 3.1% qoq), in-line with our estimates of Rs. 249cr.

We maintain our positive view on the long term prospects of BOS due to its technological leadership and strong and diversified product portfolio; however, we expect the near-term environment to remain challenging for the company given the continued slowdown in the domestic automotive industry. At, Rs. 8,312 the stock is trading at 19.7x CY2014E earnings. We maintain our Neutral rating on the stock.

Source : Equity Bulls

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