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Bajaj Electricals Limited (BEL) a part of the Bajaj Group, is a well diversified company and operates in five strategic business units namely; Appliances, Fans, Lightings, Luminaries and Engineering & Projects catering to both retail and industrial segments. BEL has grown the net sales with a CAGR of around 27% showing consistent increase in demand. The company has progressed in all the segments in the past several years through its prominent brand name and distribution channels.
Executive Summary
Ø Engineering & Products Division to drive growth:
The E & P business has expected to be driven by the growth on account of government spending infrastructure and power. Presently, E & P business contributes around 32% of the company’s revenues. BEL has a healthy order book of `1150 Crores which reflects revenue visibility in future.
Ø Diversification in Consumer durable segments:
BEL has forayed into different segments of electrical appliances with a strong leadership position in electrical iron, water heater, etc. The company has new product launches in the recent past seizing the opportunity of growing consumer pattern in the country.
Ø Strong distribution network:
BEL has a strong distribution network to support its operations in different parts of the country. BEL is planning to increase its franchisee outlets across urban and rural areas in the coming years.
Ø Business re-engineered:
To achieve higher revenues and focus into various segments, BEL has restructured its organizational strategy by increasing the responsibilities of each business heads.
Valuations
Looking into impressive performance of the company and sustained growth, we initiate coverage on the stocks with a ‘buy’ recommendation and arrive at a target price of `282/- for the period of one year based on DCF valuation methodology. At CMP `228.45 stock trades at 14.7x at FY11E EPS and 10.9x at FY12 EPS, and at EV/ EBITDA of 9.11x and 6.97x for FY11E and FY12E respectively.
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