Orient Electric - Q1 FY22 first cut - YES Securities

Revenue sees slight mix, while higher commodity prices and adverse business mix dents margin

- Result summary - Revenue growth missed estimates by 7% as lighting and switchgears disappointed. Revenue grew 136% yoy, while EBITDA/PAT stood at Rs223mn/68mn vs loss of Rs193mn/273mn respectively

- Margins - Gross margin contracted 132bps yoy mainly due to steep input price increase, wherein ECD segment is the most affected given adverse business mix. Share of business for ECD business increased from 58% last year to 77% this year in Q1. Whilst Lighting & Switchgear share of business has reduced YOY from 42% last year to 23% in Qtr1. Cost reduction program Sanchay helped in 0.5% cost savings.

- Electrical consumer durables: Revenue grew 213% yoy, aided by favourable base. Fans business clocked a >200% growth over last year driven by growth across all segments and channels led by premiumization and increase in reach. Cooler business yet again impacted by in-season lockdowns for the second consecutive year, Appliances business managed to garner ˜ 90% growth over last year. Coolers exited the season with a high inventory in the pipeline resulting in increased working capital.

- Lighting and switchgears: This business was also impacted due to low construction activities and liquidity issues with builders. There was some respite in June with retail sector and projects resuming. Lighting and switchgears business is yet to see traction as site clearances initiated though at a slow pace. Consumer lighting business has grown at 50% yoy, while tender business was impacted due to lockdown in various geographies.

- New product launches: Company continues to launch new products across the price segment with increased focus on entry level and mid-segment Fans.

- Working capital: Working Capital has reduced from Jun'20 by Rs280mn and by 81 days. However, on sequential basis, the Working Capital increased by Rs1780mn and by 42 days. Readiness for the season and preparedness to service pent-up demand were the prime focus to ramp up inventory. No special collection or other schemes were promoted this quarter and hence the receivables remained at marginally higher levels as market recoveries and rotation of business were affected during the Covid wave 2 period in the quarter.

- Near-term outlook - We expect ECD and B2C lighting business to bounce back from Q2, while B2B and tender business to revive gradually from 2HFY22.

- Our view - Stock trades at 48x FY23 EPS which is at premium to Crompton and discount to Havells. Consistent delivery and outperformance can lead to multiple re-rating and EPS upgrades. We remain neutral on the stock.

Shares of Orient Electric Ltd was last trading in BSE at Rs. 322.7 as compared to the previous close of Rs. 334.15. The total number of shares traded during the day was 38234 in over 1709 trades.

The stock hit an intraday high of Rs. 337 and intraday low of 318.95. The net turnover during the day was Rs. 12553813.

Source : Equity Bulls

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