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Bajaj Electricals 4QFY2014 performance highlights and results update

June 3, 2014, Tuesday, 11:10 GMT | 06:10 EST | 14:40 IST | 17:10 SGT
Contributed by Angel Broking

Bajaj Electricals Ltd. (BEL) reported disappointing set of numbers for 4QFY2014. Top-line reported growth of 15.3% yoy to Rs.1,271cr, higher than our estimate of Rs.1,214cr; mainly led by E&P segment (yoy growth of 54.1%). On EBITDA front, BEL reported profit of Rs.5.5cr, lower by 58.5% yoy while margins contracted by 77bp to 0.4% owing to higher other expenses. Following the poor operating performance, BEL reported PAT loss of Rs.10.7cr vis-à-vis 0.63cr profit in 4QFY13.

Increased ad spends and leveraging on strong brands to lead growth: BEL elaborated its ad spends to Rs.63cr in FY2014 and is expected to spent Rs.60cr in FY2015, 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.

Selective order intake & timely execution in E&P segment to be a game changer: E&P, which constitutes ~30% of total revenue has current order book of Rs.2,200cr. Despite strong inflows historically, the segment has been posting losses since last 3-4 years mainly due to poor margins at which orders are bagged coupled with delay in project completion leading to cost overruns. However, the company has now become very selective in order intake by focusing more on profitability rather than revenue growth and has its mechanism in-place to ascertain timely execution of the projects. Hence, going forward, we expect the segment to rebound its EBIT profitability gradually from current year loss of Rs.103cr to Rs.16cr and Rs.23cr in FY2015E and FY2016E respectively.

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 EBITDA to grow at a CAGR of 16.4% and 106% (due to low base) respectively over FY2014-16E, while bottom line to post Rs.189cr in FY2016E. We continue to maintain our Buy rating on the stock with a revised target price of Rs.441 based on target Ev/Sales of 0.8x for FY2016E.