BAJAJ ELECTRICALS :: Fairwealth Investment Ideas 2012

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

BAJAJ ELECTRICALS LTD


Bajaj Electricals Ltd (BEL) is a 72 year old company with diversified business

interest in consumer durables, lighting and engineering & projects (E&P). The

company has grown strongly with revenues increasing at CAGR of 26% and a

staggering 40% CAGR in the bottom line in last five years backed by robust

growth in consumer segment and steady growth in other divisions.

Investment Rationale

􀂾 Consumer durable which consists of small appliances and fans has registered a

strong 3 year CAGR growth of 25.9%. Management has a very bullish stance on

consumer appliances’ space and expects a growth of 20-24% (3x GDP growth).

We expect segments revenue to increase to Rs.1945 Cr in FY13E from Rs.1276.9

Cr in FY11 with a potential to grow at a CAGR of 23% over FY11-13E.

􀂾 Company’s E&P segment which faced headwinds in Q1FY12 is showing

credible traction with revenues increasing 9.7% YoY to Rs.171.2 Cr. Segment

reported EBIT margins of 3.8% as against an operating loss in previous quarter.

BELs current order book stands at Rs.742 Cr which provides revenue visibility for

the current financial year. Lighting and luminaries segment combined is expected

to register revenue of Rs.842.2 Cr in FY13E at 15.5% CAGR.

􀂾 Among the 3 segments, consumer durable is the fastest growing segment with

EBIT margins at 10-13% The share of consumer durable segment to total

revenues has increased from 43.9% in FY08 to 46.6% in FY11. Going ahead, we

expect consumer durable contribution to overall sales to increase to 50% in

FY13E due to higher growth in this segment compared to other segments which

would lead to margin expansion.

􀂾 Q2FY12 performance was a mixed bag with revenues above expectations

while margins being under pressure. Revenues grew 19.2% YoY to Rs.700.8 Cr,

EBIDTA margins fell 22 bps to 7.6%, APAT at Rs.25 Cr registering a YoY

growth of 7.9%, APAT margins however fell 37 bps to 3.6%.

􀂾 Company witnessed pressure on its EBIT margins primarily due to the

consumer durables segment which saw a decline in margins to the tune of 207 bps

YoY in Q2FY12. Consequently company’s overall EBIT margin fell 40 bps YoY

to 7%.

Valuations

At the CMP, BEL trades at a P/E and EV/EBIDTA of 9.6x and 5.5x, discounting

its FY12E numbers. Based on increasing share of consumer segment, higher cash

flows and strong growth prospects, we value the company at 11x FY13E EPS and

arrive at a target price of Rs.241. We recommend BUY