For 1QFY2017, Bajaj Electricals (BEL)’ top-line and bottom-line have come in
below our estimates. The top-line growth was dampened by the poor
performance of the Consumer durables and E&P segments. However, on the
bottom-line front, the company reported a modest growth due to slight
improvement in the operating performance and lower interest cost, depreciation
cost and taxes.
Top-line de-grew 5% yoy: The top-line de-grew by ~5% YoY to Rs952cr (below our
estimate of Rs1,188cr), mainly due to de-growth of 8% YoY in the Consumer
Durables segment to Rs548cr and lower growth of ~1% YoY in the E&P segment to
Rs414cr.
Despite revenue de-growth, PAT grew ~12%: On the operating front, the company
reported a mild margin improvement (OPM up by 37bp YoY to 5.9%), primarily
on account of lower raw material costs during the quarter. The reported net profit
grew by ~12% YoY to Rs22cr, again underperforming our estimate of Rs27cr, on
account of lower sales growth.
Outlook and valuation: On expectation of timely execution of new projects in the
E&P segment and with the Lighting and Consumer Durables segments expected to
benefit from an improvement in consumer sentiments going forward, we expect
the company’s top-line to grow at a CAGR of ~12% to Rs5,805cr and bottom-line
to grow at a CAGR of 24% to Rs147cr over FY2016-FY2018E. We retain our
Accumulate rating on the stock with a revised target price of Rs277.
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