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Bajaj Electricals 3QFY2012 performance highlights and results update

Contributed by Angel Broking

Bajaj Electricals (BEL) posted strong top-line growth of 15.1% yoy to Rs.794cr (Rs.690cr) in 3QFY2012. The company’s OPM fell by 212bp yoy but improved by 66bp qoq to 8.2%. PAT for the quarter came in at Rs.33cr (Rs.41cr), down 19.1% yoy. We recommend Buy on the stock.

Top-line growth driven by the lighting and consumer durables segments: BEL’s sales grew by 15.1% yoy due to strong performance by the lighting and consumer durables segments, which grew by 18.8% and 24.7%, respectively, while the E&P segment witnessed a decline of 5.1% yoy. The company’s OPM declined by 212bp yoy to 8.2% (10.3%) due to increased other expenditure. Despite a 212bp OPM contraction, PAT margin declined by 175bp yoy to 4.1% (5.9%), owing to higher other income, which increased by 204% yoy to Rs.2cr. PAT for the quarter came in at Rs.33cr, down 19.1%. Going ahead, we expect the company’s margin to improve from these levels on the back of easing commodity prices and closure of lower-margin E&P projects.

Outlook and valuation: We expect the trend of strong top-line growth to continue going ahead as well. Further, we expect the company’s margin to improve from these levels on the back of easing commodity prices and closure of lower-margin E&P projects. Overall, we expect the company to post a top-line CAGR of 15.7% over FY2011–13E. We expect adjusted PAT to register a CAGR of 18.5% to Rs.183cr over FY2011–13E. With the recent sharp correction, the stock is available at attractive valuation on just 9.3x FY2013 earnings, against its five-year historical average of 11x one-year forward earnings. We recommend Buy on the stock with a target price of Rs.201, valuing the stock at 11x FY2013 earnings.