Valuation and view: The transition to BS-VI led to further market share loss in CVs as well as a continuous decline in its stronghold PV diesel, although the 2W segment has opened up for BOS (one of the 3-4 players in 2W EFI). Valuations have corrected in line with muted earnings over the last four years, dilution in its competitive positioning, as well as on concerns due to EVs. While it is too early to assess the competitive landscape in EVs, BOS is very well-prepared to leverage electrification in 2Ws. We expect it to outperform underlying industry volumes, barring the substantial divergence in segmental trends, driven by an increase in content under BS-VI as well as additional revenue from 2W EFI. The stock trades ~29.3x/25.4x FY22E/FY23E EPS. The stock price largely reflects all the negatives, but a re-rating catalyst may emerge in 2-3 quarters. We...

Bosch said (1) mobility revenues for 9MFY21 declined ~13% vs. industry decline ~24%, (2) automotive demand is 10% of global semiconductor demand. India imports entirety of its needs. Semiconductor/micro controller shortage does not originate at Bosch but in the global supply chain; Bosch is facing supply shortages on the imports side and is consequently finding it difficult to service some of the automotive demand. The situation is set to drag on for some months, (3) by 2030, ICE to still be ~75-80% in India with EV forming ~20-25% (4) ECUs, exhaust aftermarket, hydraulics, engineering...

Loans to Group cos for working capital to improve treasury yield for BOS We hosted an interaction with the senior management of Bosch Ltd (BOS) Mr Soumitra Bhattacharya (MD, Bosch Ltd & Regional President, Bosch Group India) and Mr Srini Srinivasan (CFO & Executive Director, Bosch Ltd) for an update on the business, to get an insight into BOS' level of preparedness for the technological disruption, and to discuss the...

Automotive demand is improving with Bosch expected to reap benefits of increased content per vehicle. Bosch topline grew 7% yoy in Q2; with ongoing festive season, Bosch expects double-digit growth in Q3. We expect strong recovery in FY22 driven by normalization of economic activities. Margins are expected to improve going ahead, driven by increased localisation,...

Bosch's Q1FY21 revenue fell 64.0% YoY to Rs. 992cr on account of weaker demand with the fall in overall economic activity. Automotive products segment revenue fell 65.6% YoY to Rs. 813cr. Domestic mobility business and beyond mobility sector both posted decline of 72.0% and 59.0% YoY, respectively, while the exports dropped 46% YoY. Commercial and passenger vehicle segment (fleet operators) have been hurt the most and may take time to revive due to slump in demand and tight credit conditions. However, the aftermarket sales from tractors have been restored briskly due to good monsoon and high crop yield. Long-term drivers for growth will be driveline market...

Post Covid-19, the domestic auto industry is expected to see gradual volume improvement, with rural-facing (tractors, motorcycles) and personal mobility enablers (passenger cars) expected to outpace CVs and public transport categories. Bosch expects the industry to take four to five years to return to peak FY19 volumes, pending affirmative policy intervention (GST cut, scrappage policy, etc.). While overall demand picture remains subdued for Bosch courtesy high exposure to CV space and dwindling presence of diesel powertrain in India, we expect it to outperform its OEM clients courtesy (1)...

4QFY20 saw the first quarter of BOS outperforming underlying industry growth; this was led by the initial benefit of a BS6 content increase and the 2Ws segment addition. We believe stock price is largely reflecting for all the negatives, but a re-rating catalyst may emerge within We downgrade our FY21/FY22 EPS by 10%/3% to reflect volume decline. However, ramp-up beyond the first shift would depend on ramp-up at tier-2 / tier-3 vendors, which may face a labor shortage if migrant labor takes time We downgrade FY21/FY22 EPS by 10%/3% due to lower volume estimates for the underlying industry, diluted by higher other income. We downgrade FY21/FY22 EPS by 10%/3% due to a lower volume estimate for the underlying industry, diluted by higher other income. Going forward, we expect BOS to outperform underlying industry volumes, barring the substantial divergence in segmental trends, driven by an increase in content under BS6 as well as additional revenues from 2W EFI.

While the domestic auto industry was already reeling under demand challenges across segments (particularly in CV) during the past 18 months, the Covid-19 Black Swan event has further pressurised (1) demand in the medium term by reducing incomes and consequent propensity to spend and (2) supply in the short term, with manufacturing activities across the country grinding to a halt overnight. As a vital part of the automotive supply chain, ancillaries such as Bosch would continue to feel the second order effects of slowdown in vehicle demand over the coming quarters. The...

The domestic auto space continues to face demand-side challenges across segments at present (for 10MFY20 - PV down 15.4%, CV down 20.3%, 2-W down 15.9%). Increase in product prices on account of introduction of safety features/other regulations, higher taxes and reduced propensity to spend is affecting PV segment while the CV segment is suffering from several issues of cyclical (high installed base, slowing economic activity) and structural (system idle capacity) nature. The upcoming changeover to BS-VI regime is set to further complicate the demand and pricing scenario. We expect the...

Given near-term weak demand outlook and transition phase of BS-VI, we maintain our HOLD rating on the stock with a roll forward price of Rs. 15,314 based on 25x FY22E adj. EPS. Revenue improves sequentially, down YoY Total revenue decreased to Rs. 2,537cr in Q3FY20 (down 15.7% YoY) due to weaker demand from OEM's and structural changes due to BS-VI transition. Automotive products segment revenues fell 15.5% YoY to Rs. 2,143cr and revenue from others division declined 19.7% YoY to Rs. 408cr. Mobility business sector decreased 25.8%...

There is no end in sight as the near-term weak demand environment would be followed by BS6 transition, posing a risk of further market share loss in CVs and a decline in market of PV diesel, though 2W EFIs would dilute the impact. We downgrade our EPS estimate by ~5% for FY21 to factor in the emerging insights on BS6 competitive positioning. For 9MFY20, revenue/EBITDA/PAT The companys domestic revenue decline was much steeper than the underlying industry decline (-25% v/s -11% YoY), primarily led by M&HCVs.; Gross margin improved ~290bp YoY (+330bp QoQ) due to higher service income, cost reduction and inventory changes. Near- term weak demand environment/BS6 transition pose risk to our earnings with TP of ~INR15,150 (~30x Dec21E EPS). We estimate ~11%/16%/11% revenue/EBITDA/PAT CAGR, though changing competitive positioning poses risk to our estimates. Near-term weak demand environment and BS6 transition pose risk to our earnings estimates.

Its endeavor is to offer lowest cost solutions (not just components) relevant to Indian OEMs by leveraging its global supply chain and India operations. For electronic fuel injection (EFI) system, BOS has relations and contracts with key players. BOS has solutions for the entire spectrum of hybrid from P0 to P4 level. Globally, Bosch has covered substantial grounds on e-mobility and has solutions across the spectrum e-motors (48v to 400v), converter, inverter, electronic EV adoption would entirely depend on total cost of ownership (TCOs), distance travelled on daily basis and infrastructure. It already has strong positioning in the China EV market (for 2Ws and PVs) and Since 2018, its parent has won orders worth EUR13b globally in the e-mobility While the BS6 transition poses risk of further market share loss in CVs as well as continuous decline in its stronghold PV diesel, 2W opportunity should open up for BOS (one of the 3-4 players in 2W EFIs).

Revenue decreased to Rs. 2,779cr in Q1FY20 (-16.5% YoY). Revenue from automotive products was down 13.5% YoY to Rs. 2,360cr (contributing ~85.0% to total segment revenue) and others division reported revenue of Rs. 424cr, a decline of 13.1% YoY (contributing ~15.0% to total segment revenue) in Q1FY20. Domestic sales declined 18.2% YoY, while exports declined by 8.6%. Drop in revenue is primarily because of weak condition in the Indian auto market, which was further affected by the liquidity crunch in India's banking sector. Bosch Limited reported 21.7% YoY decrease in EBITDA in Q1FY20 to reach Rs. 582cr. EBITDA margin declined 140bps YoY to 20.9%...

Bosch has an established leadership in diesel technology (starter motors, common rail systems), with market share in gasoline fuel injection systems lower courtesy its late entry into that space. With BS-VI rollout, lower capacity diesel engines are expected to migrate to gasoline given the prohibitive price increase in the former would further exacerbate existing cost difference between the two technologies. While diesel is seen remaining the dominant fuel choice among UVs, larger engine capacity passenger cars, tractors and the CV space, Bosch's addressable market is...

Migration away from diesel to hurt powertrain division! Implementation of new emission norms i.e. BS-VI from April 2020 onwards is set to change the fuel preference landscape in the passenger vehicle space. The quantum of cost increase necessitated by introduction of new technology is expected to be higher for diesel vehicles compared to petrol vehicles, thus further exacerbating the existing initial cost difference between the two. For the smaller passenger car models, in particular, this cost increase is seen as being prohibitive from a demand perspective. The...

310bp YoY to 18.8% (our est. 19.8%) impacted by negative operating leverage. Lower tax restricted the decline in PAT to 17% YoY at INR4.1b (our est. INR4.4b). In FY19, Revenue/EBITDA/PAT grew 5%/3.4%/11.5%. Concall highlights: (a) FY20 outlook cautious due to BS6 transition, but growth expected from 2HFY20. It expects OEMs to stop manufacturing BS4 vehicles latest by end-3QFY20. (b) Aftermarket business grew 8-10% in CY18, but, 1QCY19 growth was muted. (c) BOS has ~33% market share in the gasoline business; it is growing in line with industry. (d) Capex: ~INR6b in...

Bosch reported mixed Q3FY19 results. Revenues came in at | 3,096 crore (up 0.8% YoY). Gross revenues from the automotive segment (~80% of revenue) were flat YoY at | 2,537 crore, with the Powertrain Solutions business declining 2.7% YoY and the aftermarket division growing 5.8% YoY Gross revenue from the Non-automotive segment increased 4.8%...

Revenues came in at | 3,201 crore (up 13.8% YoY), below our estimate of | 3,263 crore. Gross revenue from automotive segment grew 13.5% YoY to | 2,748 crore supported by Powertrain solutions & aftermarket division (grew 20.9% YoY) while revenue from the non-automotive segment grew 16.3% YoY to | 463 crore primarily supported by energy and power tool business division EBITDA margins came in at 18.6% (up 56 bps YoY) vs. our estimate of 19.1% mainly supported by lower other expense & employee...

5 November 2018 Revenues grew +14% YoY (flat QoQ) to INR32b (our est. Auto revenue grew 12.3% YoY, whereas non- auto segment grew 14.3% YoY (driven by energy and power tools business). Domestic revenue grew 16% YoY, while exports declined by 14% YoY. EBITDA grew 17% YoY (-5% QoQ) to INR6b (in-line). EBITDA margin contracted 90bp QoQ (+60bp YoY) to 18.6% (v/s est. 19.7%), as RM cost was higher at 56.7% (+230bp QoQ), impacted by adverse forex and additional cost of importing fuel injectors. Lower depreciation and higher other income boosted PAT growth of 19% YoY to INR4.2b (v/s est.