Buy Bajaj Electricals, target price Rs 1230: JM Financial

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Buy Bajaj Electricals, target price Rs 1230:  JM Financial


JM Financial has buy call on with a target price of Rs 1230. The current market price of Bajaj Electricals Ltd. is Rs 961.95.

Bajaj Electricals Ltd., incorporated in the year 1938, is a Mid Cap company (having a market cap of Rs 10971.37 Crore) operating in Consumer Durables sector.

Financials
For the quarter ended 31-12-2020, the company reported a Consolidated Total Income of Rs 1522.57 Crore, up 24.12 % from last quarter Total Income of Rs 1226.70 Crore and up 17.94 % from last year same quarter Total Income of Rs 1291.02 Crore. Company reported net profit after tax of Rs 98.19 Crore in latest quarter.


Investment Rationale
The brokerage reiterates bullish view on Bajaj Electricals (BEL) on account of a) sustained outperformance to peers in consumer products segment revenue growth, b) structural improvement margin trajectory on account of gross margin improvement and cost optimisation (e.g. tie up with Mahindra Logistics for logistics solutions (estimate savings between 100-200bps savings annually starting FY22), c) phasedown on EPC segment and focus on receivable collection and consequent improvement in balance sheet and d) significantly attractive valuation (25.5xFY23EPS; CP segment contribute 95% to PAT). Near term commodity led pricing/margin pressure should be used as an opportunity to enter/add given a) this is industry wide phenomenon and not BEL specific, b) product portfolio is primarily small appliances/ticket size categories and demand usually is relatively inelastic, and c) RM inflation hurts smaller/unbranded players even more, thus helps organised players in market share gains. The brokerage maintains BUY rating with Mar’22TP of INR 1230 (INR 1170 earlier; 35% upside from CMP).

Promoter/FII Holdings
Promoters held 63.17 per cent stake in the company as of March 31, 2020, while FIIs held 7.96 per cent, DIIs 12.46 per cent and public & others 16.41 per cent.





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