Q3FY21 Result Update - Bajaj Electricals - ICICI Direct

Bajaj Electricals (BEL) reported a strong set of Q3FY21 numbers beating our estimates on the profitability front. Strong demand in consumer products (CP) was fuelled by the festive season, market share gains and opening up of metros driving segment sales up 34% YoY. Product wise, appliances, fan, lighting and Morphy Richard category sales were up 36%, 22%, 18% and 69%, respectively. The segment margins improved sharply by ~464 bps YoY to ~12% supported by better gross margin and various cost optimisation measures (lower logistics costs and other overheads) during the pandemic. The management has reiterated continuous investment in the CP segment to increase products offerings, brand building activities and increasing reach. This would help the company to achieve double digit revenue growth, going forward along with improved segment margin profile. On the project front, the focus remained on minimising losses. Hence, despite 18% YoY reduction in segment revenue, the company saw a substantial decline in segment losses. In 9MFY21, the company generated ~Rs. 609 crore cash flow from operations (Rs. 142 crore in Q3FY21). A substantial portion of this has been used to reduce debt, which was at ~ Rs. 441 crore now.

Valuation & Outlook

We believe strong demand outlook of consumer product category along with focus on acceleration of collections in the EPC business would further improve P&L and balance sheet of Bajaj Electricals, going forward. Given the strong performance and future outlook we tweak our earnings estimate upward by 37%, 47% for FY22E, FY23, respectively. We roll over our valuation on FY23E and value the stock on a SOTP by ascribing 25x, 8x of FY23E EBITDA, to CP and EPC business, respectively. We maintain our BUY stance on the stock with a revised target price of Rs. 1075 (earlier TP Rs. 585).

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_BajajElectricals_Q3FY21.pdf

Shares of BAJAJ ELECTRICALS LTD. was last trading in BSE at Rs.1022.75 as compared to the previous close of Rs. 921.45. The total number of shares traded during the day was 365427 in over 20797 trades.

The stock hit an intraday high of Rs. 1105.7 and intraday low of 938. The net turnover during the day was Rs. 380015215.

Source : Equity Bulls

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