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Centrum Broking Report
Bajaj Electricals Ltd.’s Q3 FY24 revenue fell 6% YoY to Rs 12.3 billion, 7%/12% below our/consensus estimate amidst weak consumer sentiments. Consumer products revenue fell 8% YoY to Rs 9.6 billion affected by tepid demand in fans and appliances category. Lighting sales were flat YoY at Rs 2.7 billion amid demand weakness and LED price erosion.
While sales from general trade was down 7% YoY, growth was healthy in alternate channels like modern retail (+ 28%), Institutional (+ 28%), E-commerce (+ 21%) and exports (+ 119%). Discounting by industry peers and various trade schemes for channel partners led to 460 basis points YoY decline in gross margin 29.1%.
However at product and category level, gross margin was up 150 bps YoY due to portfolio premiumisation and savings in cost of goods sold. Reported Ebitda margin stood at 4.7%.
Other expenses included a one-time warranty provision worth Rs 230 million, excluding which adjusted Ebitda margin would have been 6.6% (broadly in-line with our/consensus estimate of 6.7%/6.9%). Reported profit after tax fell 40% YoY to Rs 374 million.
Amidst demand softness in rural and semi-urban areas, Bajaj Electricals is focusing on product premiumisation and distribution reform. The management feels that they can achieve double digit margin in two years, if revenue grows in double digits.
Factoring in the one-offs, we cut our FY24E earning per share by 26% while EPS for FY25E/26E gets marginally trimmed by less than 2%.
Retain 'Add' rating with revised target of Rs 1,100 (Rs 1,120 earlier) based on unchanged price/earning of 35 times H1 FY26E EPS
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