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Nirmal Bang Report
Bajaj Electricals Ltd (BJE) reported revenue of Rs14.9bn in 4QFY23, up 12.3% YoY (8.1%/6.6% above NBIE/consensus estimates). CP/Lighting/EPC segment revenue stood at Rs9.9bn/Rs3.1bn/Rs2bn, up 9.5%/1%/59.8% YoY). Gross margin improved by 239bps YoY to 28.2%. EBITDA stood at Rs887mn, up 39.8% YoY. EBITDA margin came in at 6%, up 117bps YoY, 50bps/130bps below NBIE/consensus estimates. EBIT margin for the CP/Lighting segment stood at 7.1%/7.4% [+186bps/(-)171bps YoY]. EPC segment’s EBIT margin stood at 0.4% in 4QFY23 vs negative 1.6% in 4QFY22. Consequently, Adj. PAT grew by 30.8% YoY to Rs587mn (4.2%/22.5% below NBIE/consensus estimates).
Portfolio expansion through product launches, premiumization and brand strengthening led to market share gains; Fans and Coolers in particular drove volume growth. The management expects demand to normalize in 2HFY24. BJE has undergone change in “Segment Reporting” from 1st July’22, where the Lighting segment has been reported separately under one unified separate segment. BJE completed the merger with Starlite Lighting Ltd (Starlite) during 2QFY23 and hence the numbers have been re-stated accordingly. We believe that the corporate restructuring and demerger of the EPC business will result in unlocking for all the stakeholders, with better de-risking.
We have tweaked our numbers marginally and have maintained ACCUMULATE rating with a revised target price (TP) of Rs1,220 (Rs1,130 earlier), valuing the CP and Lighting business at 35x (vs 30x earlier) and the EPC business at 10x FY25E EPS. Expansion of multiple largely reflects unlocking of CP & Lighting business post-demerger.
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