Bajaj Electricals Ltd. share price target

We increase our FY21/22/23 earnings estimates by 37.3%/ 9.5%/ 3.7% and reiterate our positive stance on BJE given 1) Upsurge in demand for kitchen appliances and fans post pandemic 2) strong momentum in mass segment, more so in tier2/3 cities 3) guidance of 1% margin expansion in CP/year over the next few years and 4) strengthening of balance sheet aided by robust cash flows generation. EPC reported positive EBIT in 2Q aided by margin reversals...

Strong rural presence drives faster recovery in ECD demand The ECD segment revenue in Q1FY21 fell ~50% YoY due to almost nil sales in April 2020. However, the company saw a demand recovery of 50% in May 2020 while June 2020 sales rose 4% compared to the same period last year. The faster recovery was supported by BEL's strong presence in suburban and rural markets. On the project business, revenue fell ~60% YoY in Q1FY21. On the project front, BEL has changed its strategy to bid only transmission line towers (TLT) and illumination projects and reduce the...

We cut our FY21/22 estimates by 32%/ 3.6% on soft 1Q even as BJE Concall re-affirmed our positive stance given 1) strong underlying demand despite supply chains disruption 2) 4% YoY growth in Consumer Products (CP) in June and just flattish sales in July 3) Kitchen appliances lead recovery where BJE is market leader and 4) guidance of 1% EBIDTA margin expansion in CP/year over the next few years. Although EPC continues to be plagued by delayed execution due to Covid-19 and high overheads, collection...

BJE - Play on mass market Appliances ................................................................. 4 Story in charts ........................................................................................................ 5 BJE well placed to capture uptick in demand ........................................................ 6 Mass market positioning to capture uptick in demand ........................................ 6 Appliances (60% of CP sales): Distribution expansion & product differentiation key to growth ............................................................................... 7 Fans (26% of CP sales): Grow faster than the market; recoup lost market share ...................................................................................................... 8...

Consumer business revenue remains flat despite lockdown Despite a lockdown in March, CD business revenue posted marginal growth of 0.6% YoY led by growth in appliances, fans, Morphy Richards by 1.4%, 0.3%, 5.7%, respectively. The lighting division posted ~4% YoY dip in revenue. The company kept its focus on select product categories like fans, appliances and air coolers that are likely to see pent up demand and drive its topline at 12-15%, going forward. On the project front, BEL has changed its strategy to bid only transmission line towers (TLT) and illumination...

Our interaction with managements and dealers indicates significant prebuying activity of consumer goods during January-February 2020 on fears of supply related issues from China. While companies have secured supplies to avoid any disturbance in sales in Q4FY20, demand was negatively impacted in March 2020 owing to holiday and post that lockdown across countries. We also believe a late recovery in demand for consumer goods will also impact Q1FY21 performance due to 1) shortage of workers (due to heavy migration), 2) shift in focus on essential goods compared to discretionary products and 3) streamlining of supply chain....

BEL's E&P; segment revenue declined sharply by 53% YoY in 9MFY20 along with a reduction in order intake (| 4844 crore in FY19 vs. | 1742 crore in Q3FY20). The management plans to reduce the power distribution business in FY21E-22E by focusing on TLT and illumination (relatively better margin and asset turns). This is evident from the sharp reduction in receivables from | 2055 crore in FY19 to | 1470 crore in 9MFY20. This led to an improvement in cash flow and reduction in debt by ~| 200 crore in Q3FY20. The management has guided that with the infusion of equity (raised through...

Bajaj posted a revenue decline of 31.7 percentYoY due to sluggish performance of EPC segment impacted by lower execution in UP projects.

The CD division revenue growth at ~9% YoY was largely impacted by slower demand in Q2FY20. While the fan business increased 22% YoY, the appliances, lighting and Morphy Richards business grew albeit at a low pace of ~7%, ~2% and 2.2%, respectively. We believe the CD business is likely to grow at a CAGR of ~13% in FY19-21E led by dealer addition and market share gain in some of the leading categories like fan and water heater segments, going forward. On the EPC front, while illumination and lighting revenue grew ~11% YoY, the transmission line tower and power...