Bajaj Electricals 3QFY2014 performance highlights and results update
February 13, 2014, Thursday, 09:42 GMT | 05:42 EST | 15:12 IST | 17:42 SGT
Bajaj Electricals Ltd (BEL) reported a mixed set of numbers for 3QFY2014. Its top-line reported a growth of 18.4% yoy to Rs.1,033cr, 5.1% higher than our estimate of Rs.983cr. On the EBITDA front, BEL reported a profit of Rs.58cr, higher by 60.5% yoy, mainly attributable to a dip of 207bp yoy in other expenses as a percentage of sales. Subsequently, the EBITDA margin came in at 5.6% during the quarter, up 146bp yoy. Subsequently, the PAT came in at Rs.20cr, higher by 71.9% yoy but marginally lower than our estimate of Rs.21cr.
Increased ad spends and leveraging on strong brands to lead growth: BEL has elaborated its ad spends to Rs.75cr in FY2014E (from Rs.38cr in FY2013) celebrating its 75th year, thereby increasing its visibility substantially and creating consumer pull. Moreover, BEL has known brands like Morphy Richards, Disano, Trilux to name a few, in its basket which would lead the growth for the company.
Timely execution in E&P segment to be a game changer: BEL had strong order inflows in the E&P segment (of ~Rs.370cr) in 3QFY2014; the company’s total order book stands at Rs.2,100cr as on date. Despite strong inflows, their timely execution is of grave importance since losses in the E&P segment since the last 3-4 years are pertaining to delay in project completion. However, recent measures implemented by the company to complete the projects on time will subsequently aid the bottom-line of the company.
Outlook and valuation: Consistent growth in Consumer durables (CD) and Lighting and Luminous (LnL) segments coupled with revival in the E&P segment are expected to aid top-line and bottom-line to grow at a CAGR of 17.4% and 77.8% (due to low base) respectively over FY2013-16E. As we rollover to FY2016E, we continue to maintain our Buy rating on the stock with a revised target price of Rs.280 based on target PE of 14x for FY2016E.