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Bajaj Electricals (E&P to bounce back in 2HFY11, BUY):
During our recent meeting with the company, management reiterated its expectation of a rebound in E&P segment margins, which were impaired by low-margin projects executed for the Commonwealth Games during 2QFY11. For 3QFY11, we expect the company to report a 200bps QoQ improvement in overall margins, but YoY, they would be down 50bps, owing to pressure from copper and aluminium prices in the consumer segment. We reduce our earnings estimate for FY11 by 4% to account for the margin compression. Overall, we continue to expect a rebound in PAT growth during 2HFY11 (~20% YoY) from the flat PAT recorded during 1HFY11.
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