Bosch 1Q CY11: Strong OEM demand growth, stable margins boost earnings

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Bosch
1Q CY11: Strong OEM demand growth, stable margins boost earnings


 Bosch’s net sales rose 31% yoy to Rs20.9bn led by
strong OEM demand.
 Its operating margin remained stable yoy at 18.9%
despite rising cost pressure.
 While auto segment margin rose 130bps yoy to 18.9%,
non-auto segment margin declined 400bps qoq to 9.3%.
 Net profit rose 36% yoy to Rs2.7bn.
 We roll over our target multiple to Jun ’12E.
 Maintain IN-LINE with a revised price target of Rs6,682
(earlier Rs6,180).



Revenue up 31% yoy. Bosch’s net revenue in 1Q grew
31% yoy to Rs20.9bn, led by strong momentum in the
domestic automobile segment. While auto segment
revenue grew 31% yoy to Rs18.5bn, non-auto segment
revenue rose 30% yoy to Rs2.3bn.
Margin maintained despite input cost pressure. Led by
strong revenue growth, operating margin remained stable
yoy at 18.9% despite the sharp increase in input costs. On
a segmental basis, while auto segment margin was up
130bps yoy to 18.9%, the non-auto segment margin
declined 400bps qoq to 9.3%.
Earnings up 36% yoy. Absolute EBITDA for the quarter
grew 29% yoy to Rs3.9bn. Net interest income was higher
at Rs460m, driven by higher investment income. As a
result, net profit rose 36% yoy to Rs2.7bn.
Outlook. With no signifiacnt deviation in its return ratios
(RoCE for CY11E at 29% against 31% in CY06), we
believe the stock would continue to trade at its historic
valuations.
Valuation. We roll over our target multiple to Jun ’12E
earnings. Maintain IN-LINE with a revised price target of
Rs6,682 (earlier Rs6,180).


Conference call highlights
 Exports grew 49% yoy to Rs2.4bn driven by steady recovery in Europe
 After market sales ~20% of revenue
 Other operating income for the quarter was lower on account of forex losses and was partially
offset by higher export incentives
 Commodity prices increased significantly qoq: steel up ~12%, aluminium up ~7%, copper up
~20%. Due to the sharp increase in raw material costs, Bosch was not able to pass on the
entire cost push to the OEMs
 Employee expenses have actually gone up post the revision in wages but is not reflected in
the quarter’s results on account of some write-backs / adjustments done in the quarter
 Depreciation has been lower as the capex spend for last year has not yet been operational.
Depreciation is likely to go up from 2Q onwards
 Interest income was higher on account of rising surplus funds invested in high yield assets
 Bosch has earmarked capex of ~Rs4.5-5bn each year over the next 2-3 years
 Capacity utilization remained at ~85%