Bajaj Electricals reported revenue of R1,270 crore compared with R1,110 crore in 4QFY13, marking y-o-y growth of 14.1%. While the E&P division reported robust 54% growth, poor demand impacted growth in lighting and consumer durables businesses. EBITDA margin for 4QFY14 stood at 0.4% against 1.2% in 4QFY13. While E&P posted strong turnaround with margins standing at -4.7% against -17.8% in 4QFY13, margins for the lighting and consumer durables were weak due to large discounting and unfavorable leverage.
We believe the worst of decline in margins in consumer-facing businesses is behind and with favourable exchange rate environment and recovery in demand, margins will bounce back. Over last three years, E&P division’s dismal performance clouded BJE’s underlying consumer franchise. With its expected turnaround, we believe BJE will continue to get re-rated, reducing the valuation gap with peers. We cut earnings estimate for FY15E and FY16E by 13% and 7% to factor in lower margins. We value BJE at 16x FY16E EPS of R23 and arrive at a target price of R370. Maintain buy.
Motilal Oswal Fin Services