Visit http://indiaer.blogspot.com/ for complete details Bajaj Electricals, … inspiring trust with strong brand:: Initiating Coverage - BUY
Bajaj Electricals Ltd (BEL) is India based company with diversified product
portfolio comprising of small household appliances (such as mixer grinder, electric
irons, OTGs, gas hobs and so on), fans, lighting & luminaries and engineering &
projects (E&P). E&P division comprises of high mast, poles and transmission line
towers (TLT). Majority of its products are outsourced from the third parties in
India and abroad. The company enjoys No.1 market position in electric iron, OTGs
and water heater.
Investment Rationale
Topline to grow with the CAGR of whooping 22% during the next 2-3 years:
Topline of BEL has grown with the CAGR of 26% in the past three years.
It is further expected to grow by 23% in the coming few years. The
demand drivers are-
High growth in power sector
growing middle class – changing lifestyle
revival of construction and housing sector
growing healthcare, hospitality and IT parks
Well diversified business portfolio- provides cushion to the topline of the
company:
The revenue of the company is evenly divided among its different business
portfolio. High growth E&P segment contributed 34% in FY10 whereas
lighting, luminaries, appliances and fans contributed 12%, 12%, 26% and
17% each.
This ensures well diversified revenue streams driven from high growth
sectors. This also ensures that any slow down in particular sector will not
adversely affect the revenues of the company.
Introduction of new products every now and then to penetrate deep in the
competition and maintain steady growth:
BEL is introducing new products every now and then for maintaining
steady topline and margins such as pressure cooker, portable LED torches,
lanterns, monopole tower and so on
The company is also entering in new verticals supporting its existing
business model. It has forayed in BMS in 2008. It is also looking to venture
in to water purifying solutions.
We expect that BEL will be able to mitigate competition successfully with
these new products and verticals resulting in steady topline maintaining
margins.
Outlook & Recommendation
BEL has balanced business portfolio, which is both consumer centric and
infrastructure oriented The strong distribution network, a powerful brand, wide
product portfolio, large infrastructure segment, excellent vendor base along with
excellent channel partners continue to be the major strengths of the company. At
the current market price of ` 310, the stock seems to be undervalued based on
discounted free cash flow approach. We recommend BUY rating on the stock
with a target price of ` 378/- (22% upside) in 12 months.
No comments:
Post a Comment