Views on Bosch results - Angel Broking

Views of Mr. Yaresh Kothari (Research Analyst- Automobile, Angel broking) on Bosch results.

Bosch results beats estimates

Bosch 1QCY2014 Result Review (CMP: Rs. 10,716/ TP: Under review/ Recommendation: Under review)

Bosch (BOS) recorded strong results for 1QCY2014 driven by better-than-expected operating performance and boosted further by significant increase in other income led by treasury gains. BOS posted a strong top-line growth of 10.9% yoy (13.3% qoq) to Rs. 2,450cr, sharply ahead of our estimates of Rs. 2,230cr, led by 12.9% yoy growth in the automotive segment. The non-automotive segment though posted a modest growth of 4.9% yoy during the quarter. The overall growth was driven by continued momentum in exports, which witnessed a robust growth of ~35% yoy (~13% of sales); whereas, domestic sales too posted a healthy growth of ~9% yoy driven by strong off-take in domestic tractor sales. EBITDA margins improved better than our expectations and stood at 16.3% (up 640bp qoq) as against our expectations of 15.8%. The performance improvement was mainly on account of substantial decline in other expenditure (down 21.7% qoq) and aided by cost reduction initiatives. On a yoy basis though EBITDA margins contracted 102bp due to the negative impact of the INR depreciation on the raw-material cost front. Operating profit at Rs. 399cr, up 4.4%, was ahead of our expectations of Rs. 353cr. Net profit grew strongly by 25.6% yoy to Rs. 326cr, significantly beating our expectations of Rs. 240cr. The bottom-line benefitted from higher other income (up 59.3% yoy and 52.9% qoq) on account of treasury gains related to sale of certain investments.

We remain positive on the long term prospects of BOS due to its technological leadership and strong and diversified product portfolio. We expect the company's earnings growth to remain strong going ahead led by revival in the domestic automotive industry coupled with localization initiatives and expected emission norm change due to roll out in 2015. At the CMP, the stock is trading at 23.5x CY2014E earnings. We believe that BOS will continue to enjoy premium valuations. Our rating and target price is currently under review.

Source : Equity Bulls

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