Bajaj Electricals Ltd. share price target

CGCEL is the market leader in the fan industry and increasing its presence in the small appliance category. The company has a strong balance sheet with RoCE, RoEs of 34% & 39% respectively...

We cut FY22/23/24 EPS by 13.1%/ 2.9%/ 3.7% given 1) RM inflation led margin pressures 2) demand softness more so in rural India 3) inability to pass on input cost inflation through price hikes. 3Q was impacted by a high base (pent-up demand) and moderating demand scenario leading to c.20% YoY volume de-growth. Although with no visible bounce back seen in demand...

CGCEL is the market leader in the fan industry and increasing its presence in the small appliance category. The company has a strong balance sheet with RoCE, RoEs of 34% & 39% respectively...

to 1) RM inflation and 2) EPC losses. However, BJE continued to impress with continued balance sheet improvements (CFO of Rs4.7b/ Debt reduction of Rs4.9bn). Despite demand not being as buoyant as LY (due to pent-up demand), given sustained MoM improvements, BJE remains optimistic on the...

About the stock: Bajaj Electrical's business portfolio spans across s consumer products (CP) and EPC (illumination, power transmission and power distribution). CP (appliances, fans, lighting) contributes ~72% to topline and its premium brands includes Morphy Richards and Nirlep. The company...

We cut our FY22/23 earnings by 6.2% / 1.5% on soft 1Q given margin pressures on the back of 1) unabated commodity inflation and 2) various oneoffs/ non comparable costs. CP margins were negatively impacted due to 1) reallocation of costs (Rs12cr) from EPC to CP 2) increased A&P; spends (Rs29cr vs Rs14cr) 3) Delay in transition of logistics arrangement with Mahindra due to Covid (Rs5cr) 4) Employee incentives (Rs3cr) and 5) VRS in Hind Lamps facility (Rs2cr). However, with demand trend fairly healthy BJE...

Bajaj's CP EBIT margin increased 190 bps YoY to 8.7% in Q4 (up 320 bps YoY to 9.6% in FY21) led by price hikes and higher operating leverage. On the EPC front, the company managed to reduce losses from | 23 crore in Q4FY20 to ~ | 8 crore in Q4FY21 due to reduction in exposure of low margin orders and various cost optimisation measures. While BEL guided that project business will start a positive contribution from FY22E onwards, the CP segment margin would see further improvement (EBIT margin of 10%+)...

Despite higher advertisement expenses (up 29% YoY to | 45 crore), the strong CP segment margin was a function of better gross margin and permanent savings in other overheads like logistics costs. EBITDA margin is likely to remain elevated supported by price hikes (in the range of 5-9% from January 2021) and increased focus on premium product category. We...

We increase our FY22/23 earnings estimates by 8.9%/ 9.8% and reiterate our positive stance on BJE given 1) resilient demand momentum across product categories, more so in kitchen appliances 2) market share gains aided by increased distribution reach in smaller towns/ rural India and mass market positioning 3) persistent expansion of CP margins 4) sustained improvement of balance sheet aided by robust cash flows generation. Although sustained...