Orient Electric Q4 Results Review - E-Waste Provision Hit Operating Performance: Systematix

Systematix Research Report

Orient Electric Ltd.’s Q4 Ebitda/profit after tax missed our estimates as they declined 34%/48% YoY due to 49% surge in other expenses (e-waste provision of Rs 186 million, 2.4% of revenue).

Revenue grew 20% YoY (inline), driven by electrical consumer durable (up 24%, led by 29% rise in fans), B2B lighting and switchgears. Southern market scaled up fast (Q4 revenue up 33% YoY versus low double-digit growth for industry): South now contributes 1/3rd to total revenue.

E-commerce sales surged 85% YoY; the company is in talks with large format retail chains. All ceiling fans are now under BIS standard; next in plan is table-wall pedestal fans.

Project ‘Spark Sanchay’ saved Rs 310 million cost in Q4 (FY24: Rs 760 million, 2.7% of revenue). Revenue in the direct to market states grew 46%/65% YoY in Q4/FY24.

Orient Electric has initiated rollout in J&K and HP in April 2024 and aims to include three-four more states in FY25. DTM now contributes 30%+ to company’s total revenue.

Capex stood at Rs 460 million/1.8 billion in Q4/FY24. Hyderabad plant started commercial production in May-24. Started with TPW fan manufacturing, ceiling fans will be added soon too. This large size plant has capacity to double the company’s revenue.

We keep earnings estimates unchanged post Q4 result. We expect 12%/59% compound annual growth rate in revenue/profit after tax over FY24-26E, after a muted 9%/2% CAGR over FY19-24.

The cost savings program (Rs 760 million in FY24) could boost margins ahead despite continued high A&P spend (~4.5% of revenue).

Maintain Hold with an unchanged target price of Rs 223, based on 25 times FY26E P/E. Healthy uptick in revenue and margin is key for scrip’s valuation re-rating.

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