Performance marred by input cost hikes and lack of demand especially from the rural areas | Bajaj Electricals Q3 FY22 Conference Call

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  • Revenue from operations was down 12.02 per cent to Rs 1,319.81 crore during the quarter under review as against Rs 1,500.14 crore in Q3FY21 and 1% up in QoQ terms.
  • Operating profit declined by 5% on QOQ and 35% on YoY basis. Operating margins at 6.9% as opposed to 7.2% in Q2FY22 mainly due to raw material inflation.
  • Profit declined to 48 Crore which is -23% on QoQ and -51% on YoY basis.
  • Consumer Products (CP): Moderate 6% YoY de-growth on higher base. Volume de-growth mainly due to high base effect (heavy pent-up demand in Q3 FY’21) and greater exposure to rural segment (in overall mix) which has witnessed substantial slowdown; Surpassed INR 1,000 crores mark (2nd highest historical high). Operating Margin at 9.0% (dilution of 330 bps (basis points) mainly on a/c of rise in input costs & negative operating leverage). 2-year Operating Profit (EBIT) CAGR in excess of 20%.  Gross Margin & EBIT dilution in excess of 200 & 300 bps resp. mainly on a/c of commodity headwinds & no price-hikes taken in Q3.
  • Channel Highlights: Balanced Portfolio b/w Trade and Alternate (68: 32). Robust growth in emerging “Institution Channel” (60% YoY), albeit on small base. Widening exports reach: Foray into new territories of Iraq, Maldives & Burkina Faso.
  • Engineering, Procurement and Construction (EPC): Overall revenue de-growth mainly due to selective new orders in-take. Consolidation of leadership in Illumination (flattish on YoY basis vs double-digit Industry de-growth). Carry Forward Order Book of INR 607 crores (Illumination – 178, PT – 376, PD – 53 crores)
  • Price hikes: From 11- 17% across the categories from Jan-21 to Sep-21. No hikes taken in Q3FY22. 3-5% price hikes in Q4 will be taken based on competitive intensity and demand.
  • Normally Q3 is the best quarter for the company in terms of sales. But company is not seeing a secular growth and the company expects Q4 also to be average quarter.
  • Region wise General commerce sales: East- 30%+, West- 22%+, North- 19%, South- 14%.
  • Distribution: 2.2 Lakh retailers. Ecommerce constitutes 9% of the total sales.
  • Management has said that in Lighting category they are behind their competitors. They need to invest more in the product mix as well as marketing.
  • Corporate Restructuring: New Company “Bajel Projects Limited (BPL)” incorporated. Power Distribution & Power Transmission business segments to be demerged to BPL on a going concern basis. Mirror shareholding in both companies (1:1 ratio).

Disclaimer: The information here is provided for reference purposes only and should not be misconstrued as investment advice. Under no circumstances does this information represent a recommendation to buy or sell stocks or MF.

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