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Technical Outlook

• The BSE Consumer durables index has been consolidating in CY22 after strong rally of CY20-21, thus forming a higher base. Within the space, we like Bajaj Electricals with favourable risk-reward

• The stock is currently placed near the key support area of | 1000-1100 as it is the confluence of rising 12 months EMA (currently at | 1125) and 50% retracement CY20-21 rally (| 263-1588)

• We expect the stock to resume up move and head higher towards | 1440 in coming quarters as it is the 80% retracement of entire previous decline (| 1588-858)

Fundamental Outlook

• Bajaj Electricals (BEL) is a leading player in the consumer durables space with its product portfolio spanning across electrical appliances, fans & lightings. It is among the top three players in the lighting segment and has a leadership position in mixer grinders, water heaters and electric irons category

• Despite pandemic led challenges and supply concerns, BEL’s consumer products (CP) segment has grown at a CAGR of 11.1% over FY19-22 led by new product launches and dealer expansion into new geographies. Going forward, we believe BEL’s CP revenue to grow at a CAGR of 14% over FY22-24E led by new product launches (into lightings and appliances segments), expansion of its sales & distribution channel and market share gains in its key product segments. On the margin front, we build in EBITDA margin expansion of ~330 bps over FY22-24E led by improving sales mix and easing raw material prices

• In order to streamline its business structure, BEL plans to demerge its low margin engineering & project business by the end of FY23E. We believe strong growth in the consumer product segment, robust balance sheet condition and restructuring of business profile will benefit the company in the long run

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