For 4QFY2016, Bajaj Electricals (BEL)’ top-line and bottom-line have come in
below our estimates, owing to the poor performance of its Consumer durables
business. The top-line growth was dampened by the poor performance of the
Consumer durables and E&P segments. On the bottom-line front, the company
reported a de-growth due to lower revenue growth, poor operating performance
and higher taxes.
Top-line grows ~3% yoy: The top-line for the quarter rose by a mere ~3% yoy to
~Rs1,357cr due to decline in the E&P and Consumer durables segments. The E&P
segment de-grew by ~1.5% yoy to ~Rs486cr while the Consumer durables
segment de-grew by ~0.4% yoy to ~Rs544cr. However, the Lighting segment
reported a strong growth of ~18% yoy to Rs327cr which pulled up overall
revenues and led the company to post a top-line growth for the quarter.
Poor operating performance dragged the overall profitability: For the quarter, the
company’s bottom-line declined by 26% yoy to ~Rs35cr (vs Rs47cr in 4QFY2015)
owing to a poor operating performance (margin contraction of 34bp yoy) and
higher taxes.
Outlook and valuation: With expectation of timely execution of new projects in the
E&P segment and with the Lighting and Consumer Durables segments expected to
benefit from an improvement in consumer sentiments going forward, we expect
the company’s top-line to grow at a CAGR of ~15% to Rs6,098cr and bottom-line
to grow at CAGR of 29% to Rs159cr over FY2016-FY2018E. We retain our Buy
rating on the stock with a revised target price of Rs268.

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