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Bosch India (BOSH.BO)
Buy Equity Research
In line with expectations: Demand drives earnings; Conviction Buy
What surprised us
Bosch reported 1QCY11 net income of Rs2.7 bn, up 35% yoy, 30% qoq and
11% higher than our estimates. Five key takeaways, in our view: 1)
adjusting for lower depreciation (about 40% below our estimates, due to
newly purchased machines & equipment not yet brought into production)
during the quarter, net income was in line with our estimate. 2) EBITDA
margin was stable in our view (down less than 1 pp yoy, up 1.5 pp
qoq)driven by higher raw material expenses offset by lower fixed costs as
a percentage of revenue. 3) Management expects 12%-15% industry-wide
demand growth in FY12E and observes commensurate OEM order inflow
currently. The company highlighted that risks of higher fuel and interest
costs are offset by a strong new product pipeline at the OEMs. 4) It expects
increasing localization of power train production of foreign OEMs, though
this could take time due to current low volumes. 5) The company does not
foresee significant capacity constraints in the system during 2011.
What to do with the stock
Our Buy rating (on Conviction List), 12-month CY11E P/E-based TP of
Rs7,414, and earnings estimates are unchanged. Our positive view is
driven by: 1) high stability in margins and strong cash flows across the
cycle driven by a well-differentiated technology position, 2) low stock beta
and low volatility in P/E valuation lends it relatively defensive
characteristics, and 3) the stock is trading close to its historical average on
earnings as well as balance sheet multiples. Key risks to our view include
higher volatility in quarterly earnings, low liquidity and free float.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Bosch India (BOSH.BO)
Buy Equity Research
In line with expectations: Demand drives earnings; Conviction Buy
What surprised us
Bosch reported 1QCY11 net income of Rs2.7 bn, up 35% yoy, 30% qoq and
11% higher than our estimates. Five key takeaways, in our view: 1)
adjusting for lower depreciation (about 40% below our estimates, due to
newly purchased machines & equipment not yet brought into production)
during the quarter, net income was in line with our estimate. 2) EBITDA
margin was stable in our view (down less than 1 pp yoy, up 1.5 pp
qoq)driven by higher raw material expenses offset by lower fixed costs as
a percentage of revenue. 3) Management expects 12%-15% industry-wide
demand growth in FY12E and observes commensurate OEM order inflow
currently. The company highlighted that risks of higher fuel and interest
costs are offset by a strong new product pipeline at the OEMs. 4) It expects
increasing localization of power train production of foreign OEMs, though
this could take time due to current low volumes. 5) The company does not
foresee significant capacity constraints in the system during 2011.
What to do with the stock
Our Buy rating (on Conviction List), 12-month CY11E P/E-based TP of
Rs7,414, and earnings estimates are unchanged. Our positive view is
driven by: 1) high stability in margins and strong cash flows across the
cycle driven by a well-differentiated technology position, 2) low stock beta
and low volatility in P/E valuation lends it relatively defensive
characteristics, and 3) the stock is trading close to its historical average on
earnings as well as balance sheet multiples. Key risks to our view include
higher volatility in quarterly earnings, low liquidity and free float.
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