bajaj electrical q1 fy2012

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Bajaj Electricals Limited

Bajaj Electricals Limited (BJE) reported Q1FY2012 results. Standalone revenuecame in at `5440.7mn as against `4836.9mn YoY, up 12% which was in line

with our expectations. Net profit deteriorated by 51% to `110.6mn as against`225mn mainly due to below par performance from Engineering & Projectsegment and rise in input costs. EBITDA Margin stood at 5.5% in Q1FY12 asagainst 8.4% in Q1FY11. Engineering & project segment EBIT margin stood at(6.7%) mainly due to expenses incurred in closing some sites. The manage-ment intends to reduce the total project sites from 82 sites to ~50 sites byFY12. Management has guided E&P segment growth of 20% and EBITDA mar-gin of ~8% which we believe is very optimistic considering the expected slow-down in the economy and rising interest rates. We have revised our EBITDAguidance for FY12E guidance from 9.6% to 9.0% & EPS from `17.9 to `15.6.We maintain our BUY rating on the stock; however lower our target price to`248/share from `337/share.

Key Highlights: Room cooler sales declined 50% YoY from `150mn in Q1FY2012 to `300mn in

Q1FY2011 mainly due to unseasonal rainfall which impacted sales adversely.

Fan business was up 10% YoY; higher than fan industry has grown by 3% YoY as perIFMA figures.

Morphy Richards posted growth of 39% YoY and succeeded in increasing their marketshare across all segments.

Small appliances except room heater appliances were up 35% while water heaterappliances were up 45%, mixer grinder by 23%, oven-toaster-grill by 15% and gasstove by 49%.

Working capital increased mainly on the back of closure of some projects.

Management plans to reduce number of working sites from 82 to ~50 sites by

FY12E. Capex for FY12 is `50-`60cr (`21cr for purchase property, `10cr for IT and about

`10-`15cr for machinery/equipment) Order book backlog stands at ~`730cr and management expects FY12 order book

to be `1100cr. Management has already bid for projects worth `2250cr which would be disclosed in

the coming quarters.

Segment wise performance: Q1 FY12 revenue for the Lighting segment rose 16%YoY, consumer durables segment revenues grew 15% YoY and Engineering & project seg-ment grew by 2%. EBIT stood at (`76.3mn) mainly on the back of unfavorable operatingleverage (fixed cost up 25%). Management has guided E&P segment to post `10.3 bn topline with EBIT of 8.2%. We expect Lighting segment revenue to grow by 13%, Consumer

segment to grow by 20-25% and have revised our growth prospects for E&P segment tobe flat in FY12 .

Nifty and Stock Movement

BUY

BJEL.BO, BJE IN

CMP:`204

Price Target: `248

Tushar Das

(91-22) 3028-4714

[email protected]

ULJK Financial Services Private Limited

ULJK research reports are available on Bloomberg (ULJK

August 4, 2011

Financial Performance of the Company ` in Million

Q1FY12 Result Update

Please refer to the important dissures and analyst certifications atend of the document

Market Data

Market Cap. (Rs Mn) 207

Outstanding Shares (Mn) 9

52 Week High/Low (Rs) 345/1

NSE Avg. Volume 857

Face Value 2

Shareholding

Promoter 64

MF/ Banks/ Indian FIs 11

FII/ NRIs/ OCB 9

India Public/ Others 14

Electric Components & Equipment

0

20

40

60

80

100

120

140

Aug-10

Sep-10

Oct-10

Nov-10

Dec-10

Jan-11

Feb-11

Mar-11

Apr-11

May-11

Jun-11

Jul-11

BJE Price NIFTY

(` in mn) FY09 FY10 FY11 FY12E FY13E

Net Sales 17,641 22,272 27,394 31,515 38,428

- Growth 27% 26% 23% 14% 22%

EBITDA Margins 10.1% 10.9% 9.4% 9.0% 9.6%

Adj. PAT 891 1,171 1,438 1,547 2,048

EPS 51.6 12.0 14.5 15.6 20.7

P/E 4.0 17.0 14.0 13.1 9.9

EV/EBITDA 2.7 8.4 8.0 7.7 6.0


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Bajaj Electricals

Q1FY2012 Results Analysis

Valuation: We expect the company to post a top-line CAGR of 18% over FY201113E. However,the company has been reporting depressed OPMs mainly on the back of weak E&P segment. Accord-ingly we have revised our earning for E&P segment going forward. At current price of`204, stock istrading at 13.1x and 9.9x P/E and 7.7x and 6.0x EV/EBITDA multiple for FY12E and FY13E respec-tively. We recommend to BUY the stock with a target of`248 (12x FY13E EPS).

Particulars Q1 FY2012 Q1 FY2011 YoY (%) Q4 FY2011 QoQ

Net Sales 5,441 4,837 12% 9,794 -

EBITDA 300 405 -26% 1,015 -

EBITDA Margin 5.5% 8.4% 10.4%

Interest & Fin. Charges 107 57 88% 65

PBDT (Ops) 193 348 -44% 950 -

Depreciation 31 24 31% 34 -

PBT (Ops) 162 324 -50% 916 -

Other Income 7 14 -52% 23 -

PBT (Before Ext. Items) 171 340 -50% 941 -

Extraordinary items

- Prov. for Irrecoverable portion of Loans 50

PBT 171 340 -50% 891 -

Tax Provisions 60 115 -48% 306 -

Profit after Tax 111 225 -51% 585 -

Exceptional Items:Prior Period adjustment/(profits)/provision for loans

given to companies- - 0% 0.9 -1

Taxes in respect of earlier years - - 0% 9.6 -1

Adj PAT 111 225 -51% 575 -

Particulars Q1 FY2012 Q1 FY2011 YoY (%) Q4 FY2011 QoQ

Segmental RevenueLighting 1,274 1,100 16% 2,013 -

Consumer durables 3,031 2,630 15% 4,022 -

Engineering & Projects 1,136 1,107 3% 3,759 -

Others 2 2 0% 2 -

Net Sales / Income from Operation 5,443 4,839 12% 9,796 -

Segment Result (Profit (+)/ Loss (-))

Lighting 62 22 183% 161 -

Consumer durables 291 251 16% 446 -

Engineering & Projects (76) 114 -167% 396 -1

Others (1) (0) 900% (1) -

Sub-Total 276 386 -29% 1,001 -

LessInterest 107 57 88% 65

Other un-allocable expenditure (2) (11) -84% 45 -1

Operating Profit before Tax 171 340 -50% 891 -

PBIT Margin

Lighting 5% 2% 144% 8% -

Consumer durables 10% 10% 1% 11% -

Engineering & Projects -7% 10% -166% 11% -1


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Financial Statements ` in Million

Source: Company, ULJK Research

Bajaj Electricals

Profit & Loss Statement FY2009 FY2010 FY2011 FY2012E FY2013E Cash Flow statement FY2009 FY2010 FY2011 FY2012E FY2

Net Sales 17,641 22,272 27,394 31,515 38,428 PBT 1,400 2,006 2,189 2,343 - Growth 26% 23% 15% 22% Operating profit before W.C Change 2,000 2,530 2,662 2,939

PBDIT (Ops) 1,782 2,419 2,566 2,842 3,671 Trade & Other Receivables (1,434) (2,389) (3,417) (2,125) (% of Total Net Sales) 10.1% 10.9% 9.4% 9.0% 9.6% Inventories (155) (317) (852) (335) Interest & Fin. Charges

370 314 291 472 543Loans & Advances

(66) PBDT (Ops) 1,412 2,105 2,276 2,370 3,127 Trade Payable 1,644 1,142 3,441 85 Depreciation 85 92 108 123 134 Increase/(Decrease) in provision 169 PBT (Ops) 1,327 2,013 2,168 2,247 2,993 Cash generated from operations 2,055 966 1,834 668 Other Income 57 29 57 82 95 Direct Taxes (542) (912) (806) (797) (PBT (Before Ext. Items) 1,400 2,056 2,239 2,343 3,103 Cash flow before Extraordinary items 1,512 54 1,028 (129) Extraordinary items - 50 50 - - EXTRA-ORDINARY ITEMS:PBT 1,400 2,006 2,189 2,343 3,103 Prior Period Items (2) (5) (3) - Tax Provisions 507 754 740 797 1,055 Net cash from operating activities 1,510 48 1,025 (129) Profit after Tax 893 1,253 1,449 1,547 2,048 Cash used in investing activities (421) (384) (207) (500) Prior Period Expenses (2) (5) 3 - - Net Cash used in financing activity (871) 410 (949) 766 Prov. for Tax in respect of perv. years - (76) (2) - -EO - - 10 - - Net increase in cash & cash equivale 219 74 (131) 137

Adj PAT 891 1,171 1,438 1,547 2,048 Cash & Cash equivalents (Op Bal) 320 538 612 481 PAT Margin 5.1% 5.3% 5.2% 4.9% 5.3% Closing Cash balance 538 612 481 618

Balance Sheet FY2009 FY2010 FY2011 FY2012E FY2013E Ratio FY2009 FY2010 FY2011 FY2012E FY2

SOURCE OF FUNDS Leverage Ratios

Equity capital 173 195 198 198 198 Debt Equity (X) 0.9 0.3 0.2 0.4

ESOPs 28 2 0 Interest Coverage Ratio 4.8 7.7 8.8 6.0

Reserves & surplus 2,249 4,747 5,913 7,082 8,752

Shareholder's funds 2,450 4,944 6,111 7,280 8,950 Du- Pont Analysis

Total debt 2,139 1,518 1,165 2,778 3,019 PAT/PBT (Tax Efficiency) 0.6 0.6 0.7 0.7

Deferred tax 31 - - - - PBT/EBIT (Interest Burden) 0.8 0.8 0.9 0.8

Total liabilities 4,620 6,462 7,276 10,058 11,969 EBIT/Sales (OPM) 0.1 0.1 0.1 0.1 Sales/Total Assets (Asset Turnover) 3.8 3.4 3.8 3.1

APPLICATION OF FUNDS TA/NW (Financial Leverage) 1.9 1.3 1.2 1.4

Net block 946 1,016 1,533 1,907 2,070 ROE 36% 25% 24% 21%

Capital WIP 25 1 -

Investment 316 366 366 366 366 Valuation Parameters

Deferred Tax Assets - 5 20 20 20 P/E 4.0 17.0 14.0 13.1

Total current assets 9,038 11,990 15,749 18,411 20,567 P/CEPS 3.6 15.8 13.1 12.1

Total current liabilities 5,704 6,916 10,392 10,646 11,054 P/BV 1.4 4.0 3.3 2.8

Net current assets 3,334 5,074 5,357 7,765 9,513 EV/EBITDA 2.7 8.4 8.0 7.7

Total Assets 4,620 6,462 7,276 10,058 11,969 EV/SALES 0.3 0.9 0.7 0.7


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bajaj electrical q1 fy2012

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