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Strong performance amid inflationary scenario...

ICICIdirect Research 17 Aug 2022 DISCLAIMER

What's Buzzing 

Bajaj Electricals (BEL) reported a robust Q1FY23 performance led by market share gains and margin recovery of its consumer products (CP) segment. 

Context: 

BEL’s topline growth of 43% YoY to Rs 1229 crore came in on a favourable base and strong growth in CP segment. CP revenues increased 58% YoY to Rs 973 crore led by new product launches and market share gains. E&P segment revenue grew albeit at a slow pace of 6% in line with management strategy to contain its power distribution business. The EBITDA margin expanded 602 bps YoY to 6% mainly due to savings in operating costs, which was more than enough to offset higher raw material cost. The bottomline came in at Rs 42 crore against loss of Rs 25 crore in the base quarter led by improved EBITDA margin and savings in interest outgo. 

Our Perspective 

We believe last three year's CP segment revenue CAGR at 7.5% was largely driven by new product launches and regaining lost market share in key product categories. The CP segment exit EBIT margin at 6% in Q1FY23 is mere 50 bps lower than its pre-Covid level margin, which, we believe, is encouraging. Going forward, the management has reiterated double digit revenue growth in the CP segment and further improvement in EBITDA margin (~10%) through better product mix and continued focus on cost optimisation measures. In addition, simplifying corporate structure by demerging E&P business will help drive efficiencies. We like Bajaj Electricals for its strong growth outlook in the CP business through market share gains and robust balance sheet conditions.

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