IGI Logo

Result Synopsis

Orient Electric (ORIENTEL) revenue growth of 7% was lower than ours and consensus estimates as company faced capacity constraint in the TPW fans which resulted in lower supply. Lighting on the other hand saw growth of 10.2% with switchgears and house wires experienced robust double-digit growth, while consumer lighting saw high teens volume growth. On the gross margin front various actions taken by the company is bearing fruits resulting in highest gross margin in past 14 quarters. EBITDA margin is lower as company there was an additional cost of McKinsey project and company continues to invest in building capabilities. On the positive side the company has taken two rounds of price increase in Q1 amounting to 3-3.5% covering RM inflation. As far as secondary sales are concerned the company has not seen any slowdown in demand and there has been strong sell-out indicating market share gains. Hyderabad plant has got commissioned on 6th of May and is currently under the ramping up phase and will start to see its full benefits in from the month of November when the production starts for the next summer season. Company is targeting to grow at double the pace of the industry (15%-18% CAGR) in the medium term as investments are being made to achieve strong growth. On the margin front company is confident of margin returning to its normalized levels from 2HFY25 as there has been frontloading of investments which will normalize, and McKinsey related cost has ended in Q1. Given the investments that company is undertaking for strong growth in domestic markets and new exports opportunity we expect company to deliver industry leading growth with margins normalizing from 2HFY25. We continue to remain positive on the stock and reiterate our BUY rating with PT of Rs325 valuing 40x on FY26.

We are anticipating revenue CAGR of 17%, and EBITDA and PAT CAGR of 51% each respectively for FY24-26E. We believe ORIENTEL can outperform peers and could lead to further market share gains. We believe if strategy executed well could result in strong growth in medium term.

Result Highlights

* Quarter Summary -Revenue growth of 7% was lower as capacity constraint in TPW fans resulted in lower growth in ECD. Lighting and switchgear growth at 10.2% has been better on strong performance of switchgears and house wires.

* ECD Segment – ECD segment has disappointed on decline in international business due to geopolitical challenges and capacity constraint in TPW fans.

* Margins – Gross margin has seen expansion of 249bps, while EBITDA margin saw contraction of 93bps. Continued investments and frontloading of project expenses has resulted in gross margin contraction.

* Hyderabad plant update – Hyderabad plant has started commercial production from the May after delay of 4-5 months. The plant is currently in the ramping up phase. Its will start providing benefits from November ahead of next season.

Please refer disclaimer at https://yesinvest.in/privacy_policy_disclaimers
SEBI Registration number is INZ000185632.