E&P business continues to dent profitability
BJE’s Q4FY13 PAT at Rs 6.3mn (↓99% YoY) missed estimates owing to operating losses of Rs 0.5bn in the E&P segment and margin contraction in the Lighting and Consumer segments. Sales growth of 5% YoY was driven by traction in Lighting (up 22% YoY) and Consumer Durables (up 15% YoY). However, EBIT margins for Lighting/Consumer segments declined 150bps/250bps YoY to 8%/7.9%, impacted by clearance of slow/non-moving inventory. Maintain BUY on attractive valuations.
Provisioning/cost overruns in E&P segment continue to dent profitability: The E&P segment (25% of Q4 revenues) continued to be impacted by provisioning/cost overruns. Segmental operating losses stood at Rs 0.5bn in Q4, higher than losses of Rs 0.27bn/Rs 0.4bn incurred in Q2/Q3.
Clearance of slow/non-moving inventory impacts margins in Consumer and Lighting segments: As per management, BJE cleared slow-moving or non-moving inventory to the tune of Rs 0.2bn, which impacted operating margins in Lighting/Consumer segments (margins down 150bps/250bps YoY to 8%/7.9%). Margins in these segments were further impacted by a depreciating INR. However, the company has taken price corrections in the months of April and May, the benefits of which should flow in in the current quarter.
Order book at Rs 10.7bn remains strong: BJE’s current order book position stands at Rs 10.7bn (up 76% YoY) – TLT/high Mast/Special projects accounted for 39%/4%/ 57% of the order book.
Guidance for FY14E: The management has guided for revenue growth of 18-20% in the Lighting segment, 20-22% in Consumer, and E&P sales of Rs 10bn – overall, sales guidance of Rs 42bn for FY14E. Our target price of Rs 225 assigns a target PE (1-year forward) of 10x. Maintain BUY.
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BJE’s Q4FY13 PAT at Rs 6.3mn (↓99% YoY) missed estimates owing to operating losses of Rs 0.5bn in the E&P segment and margin contraction in the Lighting and Consumer segments. Sales growth of 5% YoY was driven by traction in Lighting (up 22% YoY) and Consumer Durables (up 15% YoY). However, EBIT margins for Lighting/Consumer segments declined 150bps/250bps YoY to 8%/7.9%, impacted by clearance of slow/non-moving inventory. Maintain BUY on attractive valuations.
Provisioning/cost overruns in E&P segment continue to dent profitability: The E&P segment (25% of Q4 revenues) continued to be impacted by provisioning/cost overruns. Segmental operating losses stood at Rs 0.5bn in Q4, higher than losses of Rs 0.27bn/Rs 0.4bn incurred in Q2/Q3.
Clearance of slow/non-moving inventory impacts margins in Consumer and Lighting segments: As per management, BJE cleared slow-moving or non-moving inventory to the tune of Rs 0.2bn, which impacted operating margins in Lighting/Consumer segments (margins down 150bps/250bps YoY to 8%/7.9%). Margins in these segments were further impacted by a depreciating INR. However, the company has taken price corrections in the months of April and May, the benefits of which should flow in in the current quarter.
Order book at Rs 10.7bn remains strong: BJE’s current order book position stands at Rs 10.7bn (up 76% YoY) – TLT/high Mast/Special projects accounted for 39%/4%/ 57% of the order book.
Guidance for FY14E: The management has guided for revenue growth of 18-20% in the Lighting segment, 20-22% in Consumer, and E&P sales of Rs 10bn – overall, sales guidance of Rs 42bn for FY14E. Our target price of Rs 225 assigns a target PE (1-year forward) of 10x. Maintain BUY.
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