Buy Bajaj Electricals; target of Rs 884: Prabhudas Lilladher
Prabhudas Lilladher is bullish on Bajaj Electricals has recommended buy rating on the stock with a target price of Rs 884 in its research report dated February 04, 2021.
February 08, 2021 / 03:41 PM IST
Prabhudas Lilladher's research report on Bajaj Electricals
We increase our FY22/23 earnings estimates by 8.9%/ 9.8% and reiterate our positive stance on BJE given 1) resilient demand momentum across product categories, more so in kitchen appliances 2) market share gains aided by increased distribution reach in smaller towns/ rural India and mass market positioning 3) persistent expansion of CP margins 4) sustained improvement of balance sheet aided by robust cash flows generation. Although sustained recovery in EPC is sometime away, management expects operational profitability by 2QFY22. We continue to remain structurally positive on BJE given 1) strong brand with leadership position in kitchen appliances 2) deep distribution network and 3) RREP led gains in profitability, reach and working capital. Benefitting from operating leverage and changing mix, we build in 420bps margin expansion over FY20-23.
We estimate Sales/EBITDA to grow at CAGR of 7.5% / 36% over FY20-23E. We value the stock on SOTP and arrive at a target price of Rs884 (derived P/E of 29.7x on FY23 EPS, Consumer business valued at 30x). Maintain BUY.
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