Bajaj Electricals has been on right path with more focus on preimmunizing its portfolio and launching more products at the premium end, however it is time consuming, and company will have to continue with high brand spends and we have lowered our revenue estimates considering challenges with alternate channels and expectation of price erosion in professional lighting.
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Bajaj Electricals Ltd.’s consumer products business registered muted revenue growth of 8.5% aided by festive season sale for appliances and growth in Morphy Richards, while price erosion and challenges with MFI channel impacted lighting revenue.
Morphy Richards have grown in double digits for five quarters in a row, while double digit growth in domestic appliances like room heater and water heater propelled appliances growth. Ebit margins for consumer products has improved, however on the lighting side margins have contracted on higher brand investments (4.3% of lighting revenue) and negative operating leverage.
Management has indicated that brand spends will continue to be elevated as company wants to regain market share across the product categories. The company has already reduced logistics costs by 1.5% and is further working on bringing down by another 1.5%, however it will take couple of years before benefits starts showing results.
Management is guiding Ebitda margin of 7% by FY27, considering higher brand spends and expectation of price erosion in professional lighting and other key categories. We have aligned our Ebitda margins estimates with the management guidance and expect Ebitda margin of 7.3% in FY27.
We continue with our Sell rating with target price of Rs 600. We now assume 9% revenue CAGR vs earlier estimate of 11% revenue CAGR considering continued price erosion in professional lighting and challenges persisting with MFI and Government channel which contributes ~14% to the revenue.
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. Read more on Research Reports by NDTV Profit.Bajaj Electricals’ revenue growth at 5% YoY has been muted as there has been soft demand for kitchen appliances, fans, and continued price erosion in lighting, adds the brokerage. Read MoreResearch Reports
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