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Bosch Limited
Overweight
BOSH.BO, BOS IN
1QCY11 results: PAT growth (+36% yoy) surprises; we raise our PT
1Q CY11 PAT of Rs2.7B (+36% yoy) was above estimates led by
healthy top-line growth and lower depreciation charges. Revenue of
Rs20.7B (+31% yoy) was driven by healthy growth across segments –
exports +49% yoy, diesel segment +35% yoy, aftermarkets +20% and
power tools, etc. +20%. Depreciation charges were lower (-17% yoy)
as the new capacities are likely to get commissioned only from 2Q
onwards.
• Conference call takeaways: Management in the post results call
highlighted i) Sales outlook: They expect growth rates in the
automotive industry to moderate to 12-15% over the year.
Management expects to grow ahead of industry, given its broad-based
product portfolio. Over 1Q, exports were c.12% of sales (Rs2.4B),
aftermarket accounted for 20% of sales, and gasoline systems c.4% of
sales. ii) Margins: While the employee costs over 1Q were lower due
to writebacks related to gratuities, management expects wage costs to
rise c.10-15% (in line with inflation) over the year. RM costs were
higher (+310bp yoy) on rising commodity costs as well as a higher
proportion of traded goods; over CY11 the company will have to
factor in potential volatility in currency exchange rates, given that
Bosch imports components (particularly for its CRDi systems).
• Earnings estimates and price target: We are raising our CY11-12
estimates by c.6% to factor in the robust 1Q results. Consequently, we
increase our price target to Rs7,450. Our price target is based on 19x
forward earnings, in line with our current methodology and the stock’s
average historic five-year trading multiple.
• Risks: Key downside risks to our forecasts are a sharper-than-expected
moderation in CV segment growth, adverse currency movements, and
any change in government policy towards diesel cars
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Bosch Limited
Overweight
BOSH.BO, BOS IN
1QCY11 results: PAT growth (+36% yoy) surprises; we raise our PT
1Q CY11 PAT of Rs2.7B (+36% yoy) was above estimates led by
healthy top-line growth and lower depreciation charges. Revenue of
Rs20.7B (+31% yoy) was driven by healthy growth across segments –
exports +49% yoy, diesel segment +35% yoy, aftermarkets +20% and
power tools, etc. +20%. Depreciation charges were lower (-17% yoy)
as the new capacities are likely to get commissioned only from 2Q
onwards.
• Conference call takeaways: Management in the post results call
highlighted i) Sales outlook: They expect growth rates in the
automotive industry to moderate to 12-15% over the year.
Management expects to grow ahead of industry, given its broad-based
product portfolio. Over 1Q, exports were c.12% of sales (Rs2.4B),
aftermarket accounted for 20% of sales, and gasoline systems c.4% of
sales. ii) Margins: While the employee costs over 1Q were lower due
to writebacks related to gratuities, management expects wage costs to
rise c.10-15% (in line with inflation) over the year. RM costs were
higher (+310bp yoy) on rising commodity costs as well as a higher
proportion of traded goods; over CY11 the company will have to
factor in potential volatility in currency exchange rates, given that
Bosch imports components (particularly for its CRDi systems).
• Earnings estimates and price target: We are raising our CY11-12
estimates by c.6% to factor in the robust 1Q results. Consequently, we
increase our price target to Rs7,450. Our price target is based on 19x
forward earnings, in line with our current methodology and the stock’s
average historic five-year trading multiple.
• Risks: Key downside risks to our forecasts are a sharper-than-expected
moderation in CV segment growth, adverse currency movements, and
any change in government policy towards diesel cars
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