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Bosch Limited
Overweight
BOSH.BO, BOS IN
4QCY10 results: PAT growth (+33% yoy) ahead of estimates, raising PT
• 4QCY10 PAT at Rs.2.1B (+33% yoy) was above estimates driven by
healthy topline growth, margin expansion (+170bp yoy), lower
depreciation expenses as well as modest tax rates. Over CY10, Bosch
has reported revenues at Rs.67B (+41% yoy), driven by all round
growth - diesel segment sales were healthy, led by robust CV and
tractor sales as well as rising sales of diesel cars, export sales were
driven by renewed exports to Europe and aftermarket segment sales
benefited given a buoyant economy as well as increased focus by the
company on this segment.
• Conference call takeaways: The management in the post results call
highlighted the following i) While the order books are healthy, sales
have moderated given a base effect ii) Capital expenditure over CY10
came in at Rs.3B and management expects to incur Rs.4 – 4.5B over
CY11. The capex will be used to expand capacities across segments
iii) Current localization levels for the CRDi segment is 60%.
Management will increase localization levels further, as demand ramps
up. The competitors for Bosch include Denso, Delphi and Continental.
(However Bosch has an early mover advantage).
• Outlook: We believe that Bosch will benefit from the shift towards
‘diesel’ cars, given that the differential between petrol and diesel
continues to widen. Diesel cars have grown ahead of industry and now
account for c.25% of passenger car sales. Bosch has already invested in
CRDi manufacturing facilities and will benefit as OEMs localize
production of diesel engines in India. Further, we expect Bosch to
benefit from industry growth in the CV and tractor segments.
• Price Target: We are introducing CY12E estimates and roll forward
our PT to Dec’11. We set a revised target price of Rs6,920 based on
19x forward earnings (in line with our current methodology). This is in
line with the stock’s average historic five year trading multiple. Risks:
The key downside risks to our forecasts are slower than expected
growth in the CV segment and any change in government policy for
diesel cars.
We have a Dec'11 price target of Rs.6,960. Our target is based on 19x
on one year forward earnings, which is in line with its average historic
five year earnings multiple.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Bosch Limited
Overweight
BOSH.BO, BOS IN
4QCY10 results: PAT growth (+33% yoy) ahead of estimates, raising PT
• 4QCY10 PAT at Rs.2.1B (+33% yoy) was above estimates driven by
healthy topline growth, margin expansion (+170bp yoy), lower
depreciation expenses as well as modest tax rates. Over CY10, Bosch
has reported revenues at Rs.67B (+41% yoy), driven by all round
growth - diesel segment sales were healthy, led by robust CV and
tractor sales as well as rising sales of diesel cars, export sales were
driven by renewed exports to Europe and aftermarket segment sales
benefited given a buoyant economy as well as increased focus by the
company on this segment.
• Conference call takeaways: The management in the post results call
highlighted the following i) While the order books are healthy, sales
have moderated given a base effect ii) Capital expenditure over CY10
came in at Rs.3B and management expects to incur Rs.4 – 4.5B over
CY11. The capex will be used to expand capacities across segments
iii) Current localization levels for the CRDi segment is 60%.
Management will increase localization levels further, as demand ramps
up. The competitors for Bosch include Denso, Delphi and Continental.
(However Bosch has an early mover advantage).
• Outlook: We believe that Bosch will benefit from the shift towards
‘diesel’ cars, given that the differential between petrol and diesel
continues to widen. Diesel cars have grown ahead of industry and now
account for c.25% of passenger car sales. Bosch has already invested in
CRDi manufacturing facilities and will benefit as OEMs localize
production of diesel engines in India. Further, we expect Bosch to
benefit from industry growth in the CV and tractor segments.
• Price Target: We are introducing CY12E estimates and roll forward
our PT to Dec’11. We set a revised target price of Rs6,920 based on
19x forward earnings (in line with our current methodology). This is in
line with the stock’s average historic five year trading multiple. Risks:
The key downside risks to our forecasts are slower than expected
growth in the CV segment and any change in government policy for
diesel cars.
We have a Dec'11 price target of Rs.6,960. Our target is based on 19x
on one year forward earnings, which is in line with its average historic
five year earnings multiple.
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