ICICI Direct recommended hold rating on Bosch with a target price of Rs 17565 in its research report dated February 14, 2019.
ICICI Direct's research report on Bosch
Bosch reported mixed Q3FY19 results. Revenues came in at Rs 3,096 crore (up 0.8% YoY). Gross revenues from the automotive segment (~80% of revenue) were flat YoY at Rs 2,537 crore, with the Powertrain Solutions business declining 2.7% YoY and the aftermarket division growing 5.8% YoY Gross revenue from the Non-automotive segment increased 4.8% YoY to Rs 596 crore, driven by double digit growth in security systems and solar energy division EBITDA declined 5.6% YoY to Rs 423 crore. Attendant EBITDA margins came in at 13.7% (down 92 bps YoY). The company reported higher other income, which was at Rs 179 crore & also incurred lower depreciation charges that positively impacted the profitability. Consequent PAT increased 19.3% YoY to Rs 335 crore Bosch is currently executing a buyback offer comprising 10.3 lakh shares at a maximum buyback price of Rs 21,000/share (aggregate amount: Rs 2157 crore) and is open from February 6-20, 2019.
Courtesy its strong parentage and history of technological expertise, Bosch continues to retain an advantage during times of disruption. It boasts of an unlevered, cash surplus B/S with healthy profitability (RoCE >20%). Incorporating the change in demand scenario domestically amidst muted global auto demand and limited scope for margin expansion (built in 90 bps over FY18-20E) due to competitive intensity going forward, we estimate sales, PAT CAGR at 10.6% YoY and 17.8% YoY, respectively, in FY18-20E. Valuing the company at its long period one year forward average P/E of ~28.2x, we arrive at a target price of Rs 17,565 on FY20E EPS of Rs 622.9 and maintain HOLD rating on the stock.
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