Bosch Ltd. share price target

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)...

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...

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.

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...