Sell Bosch; target of Rs 25,221: ICICI Securities

ICICI Securitie's research report on Bosch

Revenue growth of 4% YoY was driven by 4% YoY growth in mobility business, driven mainly by aftermarket growth of 8% YoY led by higher demand for new generation diesel components. Power solutions business was up 2% YoY, aided by continued demand in PV segment along with rising content/unit. 2W business was up 15% YoY on higher sales of fuel injectors and fuel supply modules to TVS and Bajaj. BOS expects 2W segment to continue to do well in FY25 led by transition to BS VI OBD 2 norms where it expects a surge in demand for advanced sensor solutions. Its non-mobility business saw 6% YoY growth with building technologies revenue up 19% YoY driven by security systems demand and consumable goods segment up 5% YoY. BOS’ share of exports stood at 8.1% in FY24 and it aims to increase this in coming years, by increasing its competitiveness via localisation.

Outlook

Bosch India’s (BOS) Q1FY25 EBITDAM of 12% (down 110bps QoQ) was a miss against consensus estimate of 13.7%, as other expenses increased by 280bps QoQ, although in line with past 8-quarter average. Despite localisation efforts, hiving off lower margin businesses, GM continued to surprise negatively as has been for past couple of years (barring Q3FY24). Revenue grew merely 4% YoY to INR 43bn, led by continued demand in PV along with rising content/unit, though revenue growth outlook for majority of segments looks relatively lower for FY25. We believe with limited visibility of EBITDAM moving up beyond 14% levels on a sustainable basis, and BOS likely to face CV industry downcycle headwinds from mid-FY25 itself, current valuation levels look inflated. Maintain SELL with DCF-based revised TP of INR 25,221 (earlier: INR 24,067), implying 32x FY26E earnings, with earnings CAGR of 19% over FY24- 26E. Change in TP is driven by earnings rollover.