Company Update: Bajaj Electricals Ltd - ACCUMULATE - TP Rs.545 - Kotak

We note that BAEL stock has fallen sharply post Q1FY19 result and current valuations looks reasonable vis-à-vis potential growth in earnings going ahead. In view of upside from current levels, we upgrade our recommendation to 'ACCUMULATE' from 'SELL' earlier; maintain target price at Rs 545.

Key Highlights

- In our earnings model, we build 1/ cautious view on sales and margin come back in the consumer business post RREP implementation and 2/ deterioration in working capital requirement and debt accretion on balance sheet driven by higher proportion of E&P business.

- RREP roll out has been encouraging so far and company would likely report recovery from the current year onwards. Currently BAEL has covered nearly 85-90% of its distribution under RREP.

Valuation & Outlook

We still maintain BAEL valuation discount vis-à-vis the peer group due to 1/ lower margin/return ratios and 2/ company's presence in capital intensive E&P business. We maintain SOTP based target price of Rs 545. Due to upside to our target price we change rating to 'Accumulate' on company's stock.

Shares of BAJAJ ELECTRICALS LTD.-$ was last trading in BSE at Rs.496.5 as compared to the previous close of Rs. 502. The total number of shares traded during the day was 10665 in over 490 trades.

The stock hit an intraday high of Rs. 509.5 and intraday low of 492. The net turnover during the day was Rs. 5341749.

Source : Equity Bulls

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