Bajaj Electricals Q3 Results Review - Discounting, Weak Demand Delays Margin Improvement: Yes Securities

Yes Securities Report

Bajaj Electricals Ltd.'s consumer products business registered revenue decline of 8% as fans segment has seen high teens de-growth as there was high base in the previous year where fans grew 64% on inventory push ahead to Bureau of Energy Efficiency Ratings transition. Appliances has seen low single digit revenue decline, while Morphy Richards has seen mid-single digit growth.

Margins were impacted on account of one-time provisioning of warranty insurance which stood at Rs 210 million, and gross margins were lower on back of discounting. Lighting revenue has been flattish despite price erosion and subdued market condition in consumer lighting. Company expects volume growth in lighting in next four-six quarters.

We have lowered our margin estimates on increased competition and discounting done by certain players in the subdued demand environment as discounting pose significant challenging in margin improvement.

We continue to maintain our Neutral rating on the stock with profit target of Rs 1,148 valuing the stock at 38 times.

Although the lead indicator that drives the consumption has been trending positive, we would however wait for the confirmation before we become constructive on the stock.

We expect the stock to re-rate once there is sustainable improvement in profitability and pick-up in rural demand.

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.