Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us    
Google
Web www.equitybulls.com
Research

| More

Bajaj Electricals - Deleveraging remains on track - ICICI Securities

Posted On: 2020-08-12 02:57:00


Bajaj Electricals (BJE) continues to remain on track for deleveraging of the balance sheet (net debt of Rs8bn as of Q1FY21) which we reckon will continue further in FY21E/FY22E. Management outlook of flat CD revenues and breakeven EPC EBIT in FY21 is commendable. Maintain HOLD with a target price of Rs419 based on 25x FY22E EPS of Rs17 (unchanged).

- Q1FY21 was weak on expected lines. CD revenues were down by 50% YoY with 2.1% EBIT margin. Company has managed 200-300bps increase in CD margins driven by price increase which was offset due to lower sales in Q1FY21. The revenue in CD business was nil in April, 60% of last year in May and ~104% of last year in June. July continues to be decent but sporadic lockdown will pose supply challenges. Traditional retail and e-commerce (13% for BJE now) are driving sales while modern retail format remains impacted from lockdown. Kitchen appliances and fans have witnessed better traction compared to coolers. EPC business was down 59% YoY (Illumination, power distribution and transmission revenue of Rs580mn, 660mn and 900mn respectively) in Q1FY21 with EBIT loss of Rs437mn.

- Deleveraging will be a major earnings driver; discipline in EPC project selection key: Debt reduced from ~Rs20bn in FY19 to ~Rs10bn in FY20 and we estimate it to further reduce to ~Rs7bn by FY21 (company guidance Rs5.5bn). 'Debt to Equity' ratio improved from ~1.6 in FY19 to ~0.7 in FY20. Deleveraging has been due to decrease in EPC revenues (from Rs30bn in FY19 to Rs19bn in FY20) while CD has always being FCF-positive. As of Q1FY21, BJE has Rs18.4bn receivables from the EPC business. Continued discipline in project selection (especially power distribution) and faster receipt of receivables in EPC can give a positive earnings surprise. Complete deleveraging can lead to increase of Rs15 in EPS (Rs1.7bn interest cost in FY20).

- Expect EBIT to increase from Rs1.3bn in FY20 to Rs2.8bn in FY22E: We expect EPC revenues of Rs19bn in FY21E (flat vs FY20) and Rs20bn in FY22E with EBIT-breakeven in FY21E and modest EBIT of Rs400mn in FY22E. ECD revenues are expected to remain flat in FY21E (Rs31bn) as per management guidance. We build ~15% growth in consumer topline in FY22E and expect CD EBIT margin to gradually increase from 6.5% in FY20 to 7%/7.5% in FY21E/FY22E.

- CD strategy turns conservative from visionary (being practical will help in short term). (1) Product focus will consciously be on mass market rather than the earlier stress on IoT and AI. In CY17, BJE launched Project Evolve, which aimed to use the power of AI, IoT, analytics and machine learning at the forefront of customer experience. (2) BJE would continue outsourcing and stay away from manufacturing while being prudent in adspend.

Shares of BAJAJ ELECTRICALS LTD. was last trading in BSE at Rs.437.35 as compared to the previous close of Rs. 426.5. The total number of shares traded during the day was 54254 in over 3262 trades.

The stock hit an intraday high of Rs. 442 and intraday low of 419. The net turnover during the day was Rs. 23458944.


Source: Equity Bulls

Click here to send ur comments or to feedback@equitybulls.com


Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only. www.equitybulls.com, its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. www.equitybulls.com or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.





Other Headlines:

Zydus Wellness - Leadership in niche categories; initiate at BUY - ICICI Securities

Power - Setting the stage - ICICI Securities

Company Update - Elgi Equipments - ICICI Securities

Nano Nivesh - The Anup Engineering - ICICI Securities

RBI OMO announcement of Rs. 10000 crore - Angel Broking

TCS deal win - Sep 24, 2020 - Angel Broking

View on Pre-Monetary Policy by Upasna Bhardwaj, Senior Economist at Kotak Mahindra Bank

US FDA approval to Zydus Cadila - Angel Broking

HDFC Securities Institutional Research Desk: Cement Sector Thematic - Spotting the sweet spot

Bharat Forge - Expectation hurdle remains steep - ICICI Securities

Auto

Mutual Fund Review - September, 2020 - ICICI Securities

UTI AMC announces IPO date - Angel Broking

Asian Paints - Mr. Amarjeet Maurya - AVP - Mid Caps, Angel Broking Ltd

Britannia Industries - Mr. Amarjeet Maurya - AVP - Mid Caps, Angel Broking Ltd

Hexaware Technologies (Not Rated): Hexaware accepts 475/share as final delisting price - ICICI Securities

CAMS IPO - Day 2 Subscription - Angel Boking

Chemcon Speciality Chemicals - IPO subscribed 12.62 times on second day - Angel Broking

General insurance - Fire, health remain growth drivers, rising Covid claims a concern - ICICI Securities

Supreme Industries - Perfect recipe for rerating; upgrade to BUY - ICICI Securities

Titan Company - Best positioned to gain from faster-than-expected recovery. Upgrade to ADD - ICICI Securities

Sector Update - Telecom - Sep 23, 2020 - ICICI Securities

Allcargo Logistics - Highlights of Blackstone deal - ICICI Securities

I-direct Instinct - Gokaldas Exports

Economy: RBI's trilemma: allows for INR strength - Kotak

HCL Technologies - Company Update - ICICI Securities

Chemcon Speciality Chemicals - IPO Review - ICICI Securities

Angel Broking - IPO Note - YES Securities

TCS - Announcement of its blockhchain based solutions on Microsoft Azure - Angel Broking

Amber Enterpirses acquire Sidwal - Angel Broking

Dixon Technologies - Buy - YES Securities

HCL Technologies acquisition of DWS Limited - Angel Broking

Allcargo Logistics CFO Resignation - Angel Broking

Upgrade to BUY on Gateway Distriparks - Strengthening the balance sheet - HDFC Securities

BUY on ITD Cementation - Execution pickup awaited - HDFC Securities

Allcargo Logistics - Trying to stich through an integrated offering - ICICI Securities

Polymer price tracker - Other polymer (ex-PVC) prices too firm up - ICICI Securities

Angel Broking - IPO Review - ICICI Securities

IPO Review - Computer Age Management Services - ICICI Securities

Company Update - EIH Ltd - ICICI Securities

Gladiator Stocks - Godrej Properties - ICICI Securities

Company Update - Dr Reddy's Laboratories - ICICI Securities

Gladiator Stocks: Pharma Thematic - ICICI Securities

Company Update - Housing & Urban Development - ICICI Securities

Covid Recovery Pulse - E-Way bill generation shows recovery signs with auto volumes flat - ICICI Securities

Quant Pick - UltraTech Cement - ICICI Securities

Lupin & Cipla - Positive News - Angel Broking

Sterling and Wilson Solar Ltd - 106.71 MW order win - Angel Broking

Dr. Reddy's Laboratories - Settles Revlimid litigation in US - ICICI Securities

Natco Pharma - Natco to launch first generic Revlimid - ICICI Securities







Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2019