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Bajaj Elec.: Extraordinary saves the day - Views on News from Equitymaster

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Bajaj Elec.: Extraordinary saves the day

Oct 26, 2012

Bajaj Electricals has announced its September quarter results. The company has reported a 5% growth in topline and 8% YoY growth in net profits for the quarter ended September 2012. Here is our analysis of the results.

Performance summary
  • Topline grows by 5% YoY during the quarter, led by 17% growth in consumer durables
  • Operating margins contract by 4.4% as higher expenses take toll
  • Bottomline grows by 8% YoY on the back of an extraordinary income. PBT, which excludes the impact of the same, drops by a huge 80% YoY on account of poor operating performance
  • Half yearly bottomline grows 8% YoY on the back of a 12% growth in topline

(Rs m) 2QFY12 2QFY13 Change 1HFY12 1HFY13 Change
Net sales 7,010 7,338 4.7% 12,453 14,000 12.4%
Expenditure 6,471 7,095 9.6% 11,608 13,411 15.5%
Operating profit (EBDITA) 539 243 -54.8% 845 589 -30.3%
EBDITA margin (%) 7.7% 3.3%   6.8% 4.2%  
Other income 21 36 72.2% 38 69 83.2%
Interest (net) 156 169 8.2% 278 333 19.9%
Depreciation 29 34 17.8% 60 67 10.8%
Profit before tax 375 76 -79.7% 545 259 -52.6%
Extraordinary items - 247   - 247  
Tax 125 54 -56.9% 185 116 -36.9%
Profit after tax/(loss) 250 269 7.7% 360 389 7.9%
Net profit margin (%) 3.6% 3.7%   2.9% 2.8%  
No. of shares (m) 99.6 99.7   99.6 99.7  
Diluted earnings per share (Rs)*         12.1  
Price to earnings ratio (x)*         17.8  
(* on trailing twelve months earnings)

What has driven performance in 2QFY13?
  • Company's topline managed to grow by a tepid 5% YoY during the quarter. This was driven by its mainstay, the consumer durables business, which recorded a growth of 17% YoY. With the consumer story remaining intact, this segment was able to once again record impressive growth. Growth in overall topline however was impacted due to the poor performance of the E&P division, which witnessed a decline of nearly 23% YoY. However, the company has expressed confidence that things would certainly look much better second half onwards.

  • As far as margins are concerned, they took a knock of nearly 4.4% YoY during the quarter. It is clear from the table below that margins were down for all the major segments of the company. The main culprit, it should be noted, was yet again the E&P division which suffered a loss at the PBIT level. As per the company this was mainly on account of the fact that the infrastructure story has been going through a tough phase. This together with time and cost overruns in certain projects compounded the problems for the company.

    Segmental break up...
    Segment 2QFY12 2QFY13 Change 1HFY12 1HFY13 Change
    Revenues 1,892 2,017 6.6% 3,166 3,541 11.8%
    PBIT 131 130 -0.5% 205 204 -0.6%
    PBIT margin 6.9% 6.5%   6.5% 5.8%  
    Consumer Durables
    Revenues 3,395 3,987 17.4% 6,426 7,891 22.8%
    PBIT 323 369 14.3% 616 698 13.3%
    PBIT margin 9.5% 9.3%   9.6% 8.8%  
    Engg & Projects
    Revenues 1,712 1,327 -22.5% 2,848 2,559 -10.2%
    PBIT 67 (268)   (8.9) (339) n.a.
    PBIT margin 3.9% -20.2%   -0.3% -13.2%  
    Revenues 10 8 -26.2% 12 9 -24.6%
    PBIT 8 5 -34.6% 7 4 -42.0%
    PBIT margin 75.7% 67.1%   56.6% 43.5%  

  • Apart from operating margins, what also affected the profitability was the 8% jump in interest expenses as also higher depreciation charges. This led to a massive 80% fall in PBT for the company.

  • Bottomline for the quarter however was still higher by 8% YoY over the same quarter last year. This was on account of an extraordinary income to the tune of Rs 247 m. This arose due to the company's sale of its entire shareholding in Bajaj Ventures.

What to expect?
At the current price of Rs 202, the stock trades at a multiple of around 8.6 times our revised FY15 earnings per share. Despite the sharp fall after the announcement of the result, the stock is still around 14% higher than the price at which it was recently recommended. On account of this run up, the expected CAGR now stands at around 14% which we feel now makes the stock a HOLD instead of our original call.

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Mar 26, 2019 11:47 AM


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