29 May 2014
4QFY14 Results Update | Sector:
Consumer
Bajaj Electricals
BSE SENSEX
24,234
Bloomberg
Equity Shares (m)
M.Cap. (INR b) / (USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
S&P CNX
7,236
BJE IN
100.1
32.0/0.5
385/150
-1/75/75
CMP: INR320
TP: INR370
Buy
Financials & Valuation (INR Million)
Y/E Mar
2014 2015E 2016E
Net Sales
EBITDA
Adj PAT
EPS (INR)
Growth
(%)
BV/Share
( )
RoE (%)
RoCE (%)
P/E (x)
P/BV (X)
40,298 46,256 53,559
818
-53
-0.5
71.1
-0.7
8.3
-601.1
4.5
3,701
1,851
18.6
85.0
23.8
38.4
17.2
3.8
4,445
2,291
23.0
23.8
101.0
24.7
41.6
13.9
3.2
-116.2 -3,584.9
E&P turnaround on track; worst of margins in consumer business is behind:
Bajaj
Electricals (BJE) reported revenue of INR12.7b (est. of INR13.2b), compared to
INR11.1b in 4QFY13, marking a YoY growth of 14.1%. While E&P division reported
robust 54% growth, poor demand environment impacted growth in Lighting (4%
growth YoY) and Consumer Durable (-2% growth YoY) businesses. EBITDA margin
for 4QFY14 stood at 0.4% (est. 6.2%), against 1.2% in 4QFY13. While E&P posted a
strong turnaround with margins for the quarter standing at -4.7%, against -17.8%
in 4QFY13, margins for the Lighting (3% v/s 7.9%) and Consumer Durable (3.6% v/s
8%) were weak due to large discounting during the quarter and unfavorable
operating leverage.
FY15 to witness strong improvement in profitability:
BJE’s management guided
for 15% growth in Lighting and Consumer Durable divisions and 25% growth in
E&P business for FY15. With most legacy contracts for E&P division concluded in
FY14, coupled with strict timeliness in execution of new projects, E&P is set to turn
profitable from 1QFY15. Management is confident on improving E&P division’s
RoCE to 20%, thus improving overall RoCE profile. We believe the worst of decline
in margins in consumer facing businesses is behind and with favorable exchange
rate environment and recovery in demand, margins will bounce back. We expect
earnings to grow from INR-53m in FY14 to INR1.8b in FY15E / INR2.3b in FY16E.
Valuation and view:
Over the last three years, E&P division’s dismal performance
clouded BJE’s robust underlying consumer franchise. With expected turnaround of
E&P business, we believe BJE will continue to get re-rated thus reducing the
valuation gap with peers. We cut the earnings estimate for FY15E and FY16E by
13% and 7% respectively to factor the lower margins. We value BJE at 16x FY16E
EPS of INR23 and arrive at a target price of INR370. Maintain
Buy.
Atul Mehra
(Atul.Mehra@MotilalOswal.com); +91 22 3982 5417
Niket Shah
(Niket.Shah@MotilalOswal.com); +91 22 3982 5426
Investors are advised to refer through disclosures made at the end of the Research Report.