Bajaj Electricals - Yet Another Disappointing Quarter; Result Update Q2FY15:: Edelweiss

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Bajaj Electricals’ (BJE) Q2FY15 numbers were disappointing with overall revenue growing by mere 7%. While lighting declined 10%, consumer durables (CD) and engineering & project (E&P) grew 4% and 40%, respectively. EBITDA margin at 1.0% was on account of continued losses in E&P, which included provisions towards receivables. BJE reported a loss of INR142mn particularly impacted by lower sales and negative operating leverage, among others. The loss in E&P has extended over ten quarters now with little confidence on improvement in near term. Lower margins in CD and lighting businesses are likely to continue given intensifying competition in CD and shift from CFLs to LEDs in lighting. Thus, building in higher cost pressures, we trim margins by 180bps/80bps for FY15E/FY16E and earnings by 57%/26%.

Profitability impacted by lower margins in consumer businesses

Loss of market share in certain key product categories including lighting (owing to higher demand for LEDs against CFLs) and consumer durables dragged profitability. In E&P, having completed the legacy projects, profitability was affected by certain provisions towards receivables along with initial costs on project execution. Revenue, at INR10.3bn, grew 7% driven by E&P (up 40%) even as CD (up 4%) and lighting (down 10%) performance was lacklustre. EBITDA margin at 1.0% was on account of continued losses in E&P business. The company reported loss of INR142mn primarily due to lower sales and negative operating leverage, among others. E&P business order backlog at INR31bn provides visibility over 2 years.

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https://www.edelweiss.in/research/Bajaj-Electricals--Yet-Another-Disappointing-Quarter;-Result-Update-Q2FY15/27598.html