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Result Synopsis

Orient Electric (ORIENTEL) has delivered higher than estimated revenue growth on strong performance of ECD segment which grew by 11.9% yoy. Growth in ECD has been driven by re?stocking of non?star rated fans ahead of implementation of BEE rating and 2x growth in air?coolers. Gross margins have expanded on stable commodity prices, while EBITDA margins have contracted 237bps on higher one?off costs pertaining to brand building and high cost of consultancy to support ambitious initiatives towards “Go?to?market”, “Cost Optimisation” and “E?commerce. Adjusting for higher one?time costs EBITDA margin would have been 9.1%. Lighting and Switchgear has seen flattish growth as B2C demand has been subdued, B2B revenue grew in double digit on higher infra spends. ORIENTEL has completed its distribution revamp to direct distribution in 4 states and new distribution system is now yielding results and company has seen growth of 60% in these markets. We strong recovery to continue in ensuing quarters as well as realizations will inch?up on higher adoption of star rated energy efficient fans.  

We continue to expect revenue CAGR of 14%, and EBITDA and PAT CAGR of 15% each for FY22?25E. New distribution practice can result increasing the reach and thereby enabling the company to improve its market share. Considering potential of market share gains and increasing reach we continue to remain positive on the stock, we however maintain our ADD rating with PT of Rs314 as strong recovery has been priced in.

Result Highlights

* Quarter Summary ?Revenue growth is mainly on back of strong performance of ECD segment. There was aggressive re?stocking of Fans by the dealers ahead of implementation of BEE rating. Lighting & Switchgear saw flattish growth

* ECD Segment registers strong performance – Fans and Air?coolers have led to strong growth in ECD segment. Fans saw 15% growth in Q3 which is highest ever revenue for Q3. Air?cooler saw 2x growth in Q3 which has been encouraging.

* EBITDA Margins – EBITDA margin at 7.1% has seen sequential improvement, however it has been lower on yoy basis. One ?time marketing and consulting expenses have impacted margins. Excluding one?time expense, the EBITDA margins would have been 9.1%. ? Working Capital ? Working Capital has been consistently coming down and has improved further in Q3. Working capital days has reduced to 20days vs 34 days on yoy basis.   

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