Bajaj Electricals Q1 - Green Shoots In Rural Demand, Consumer Products Coming Out Of Woods: Yes Securities

Yes Securities Report

Bajaj Electricals Ltd.'s consumer products business registered muted revenue growth of 3.7% on soft demand for kitchen appliances. Summer products (fans, air coolers) and Morphy Richards premium small domestic appliances demonstrated better growth.

Margins were subdued on back of operating de-leverage and higher brand investments. The company has been aggressively launching new products large part of it at the premium end.

On the lighting front growth in professional lighting was marginally offset by drop in consumer lighting. Company believes worst is behind them for the consumer products and there has been sequential improvement. Bajaj Electricals has taken corrective actions which includes price hikes, cutting of excessive discounts and focus remains to protect the margins.

We maintain our revenue estimates as kitchen which has been key category is seeing signs of improvement. Management is witnessing green shoots in rural demand which has been pain point of the company.

We upgrade the stock to Add with target price of Rs 1,062 as-

1. Management believes worst for the consumer products is behind;

2. Bajaj Electricals will protect margins by taking appropriate actions and

3. Green shoots visible in the rural market which is key for the company.

We now value the stock at 40 times as rural is expected to do well in the coming time given the steps taken by government is aimed at improving rural consumption.

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