Buy Bajaj Electricals; Target Of Rs 585: ICICI Direct
ICICI Direct is bullish on Bajaj Electricals has recommended buy rating on the stock with a target price of Rs 585 in its research report dated November 06, 2020.
Nov 7, 2020 / 12:51 PM IST
ICICI Direct's research report on Bajaj Electricals
Bajaj Electricals reported strong Q2FY21 results with topline growth of 11% YoY to Rs 1217 crore led by strong performance of consumer products segment, which grew a healthy 13% YoY. Strong demand from semi-urban & rural regions coupled with rise in work from home culture has led to the revival in demand for home appliances in urban India. On the engineering and project front, closure of power distribution projects in Bihar help drive revenue in Q2FY21. Key takeaways from conference call are: 1) Double digit revenue growth in the consumer product segment led by strong festive demand and opening up of metro & tier 1 cities, 2) Price hike of ~2.5% in selected product categories, 3) Market share gains from unorganised players, 4) One-time gain of provision write back to the tune of Rs 40 crore in EPCs and 5) Focus on acceleration of collections in the EPC business. We believe focus on debt reduction (by improving collections in EPC business) along with improved margin profile would further lead to an improvement in return ratios, going forward. We introduce FY23E estimates with revenue CAGR of 6% in FY20-23E led by 9% CAGR in consumer product segments.
We introduce FY23E estimates with revenue CAGR of 6% led by ~9% CAGR in consumer product segments. We also believe execution of high margin orders along with improved profitability of consumer products would drive PAT, going forward. On an SOTP based valuation, we value CD, EPC at 23x, 3x of FY22E EBITDA, respectively, and maintain BUY rating with a revised target price of Rs 585.
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