Accumulate Bajaj Electricals; target of Rs 1303: Prabhudas Lilladher

Prabhudas Lilladher's research report on Bajaj Electricals

We cut FY22/23/24 EPS by 13.1%/ 2.9%/ 3.7% given 1) RM inflation led margin pressures 2) demand softness more so in rural India 3) inability to pass on input cost inflation through price hikes. 3Q was impacted by a high base (pent-up demand) and moderating demand scenario leading to c.20% YoY volume de-growth. Although with no visible bounce back seen in demand thus far (excluding winter products), BJE remains optimistic on upcoming summer season sales as cases reside and will look to implement 3-5% price hike which shall help alleviate high input cost. BJE sustained its balance sheet strengthening act (3Q CFO of Rs1.3bn; Rs810mn Debt repayment) We remain structurally positive on longer term prospects given 1) strong brand with leadership position in kitchen appliances 2) increasing shelf space by leveraging industry leading distribution network & brand strength 3) improving balance sheet aided by robust cash flow generation and 4) demerger of EPC business (excluding Illumination). We estimate Sales/PAT to grow at CAGR of 10.9% / 31.3% over FY21-24E.

Outlook

We roll forward our target multiple to FY24 and value the stock on SOTP & arrive at a target price of Rs1,303 (derived P/E of 38.4x on FY24, Consumer business valued at 40x). Maintain Accumulate.