The brokerage has cut its FY21/FY22 estimates by 55.7 per cent/19.4 per cent factoring in slower recovery in demand and accounting for revenue loss during lockdown.
Yes Securities has given a buy rating to Bajaj Electricals with a target price of Rs 493. The share price moved up by 2.03 per cent from its previous close of Rs 410.75. The stock’s last traded price is Rs 419.10.
Bajaj Electricals’ Q4 results were in line with brokerage expectations as consumer products (CP) business continued to gain strength. CP business revenues were flat on a year on year basis, even after the company lost sales of Rs 2 billion due to lockdown. Margin expansion was curtailed at 210bps year on year in Q4 due to reallocations of overhead costs from EPC. Margin expansion was also aided by a sharp cut in A&P spends.
EPC business performance was weak due to some provisions taken by the company. EPC revenues were down 46.3 per cent year on year, inline with the management’s guidance. EPC order book remained flat sequentially at Rs 17.3billion. Balance sheet improvement was led by Rs 1.3 billion of operating cash flow (OCF) and Rs 3.5 billion of capital raising in Q4. Gross debt halved on a year on year basis to Rs 10 billion.
Investment Rationale
The brokerage has cut its FY21/FY22 estimates by 55.7 per cent/19.4 per cent factoring in slower recovery in demand and accounting for revenue loss during lockdown Yes Securities maintains its buy rating on the stock for a revised target price of Rs 493, valuing the company at 26 times FY22E P/E.
Valuations remain attractive at 21.7 times FY22e P/E. Sharp earnings recovery coupled with improvement in return ratios, balance sheet and rising share of CP business would lead to valuation re-rating.
Risk: Delay in receivables from the UP project and slower revival in consumer demand.
Source: Yes Securities
Financials
For the quarter ended March 31, 2020, the company reported consolidated sales of Rs 1293.27 crore, up 1.39 per cent from last quarter sales of Rs 1275.60 crore and down -26.55 per cent from last year's same quarter sales of Rs 1760.83 crore. The company reported net profit after tax of Rs -.12 crore in the latest quarter.
Promoter/FII Holdings
Promoters held 63.17 per cent stake in the company as of March 31, 2020, while FIIs held 7.96 per cent, DIIs 12.46 per cent and public & others 16.41 per cent.
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