IGI Logo

Soft quarter amid weak demand; downgrade to Neutral

Result Synopsis

Consumer products (CP) business registered low single digit growth of 2% on account of muted demand environment and unseasonal rains impacting summer products, while appliances saw growth of 10%. EBITDA margins at 6.1% was lower as operating leverage has not kicked in and staff cost saw increase on back of enhancement in R&D team in lighting vertical. EPC business has started generating profits and it is expected to see further improvement going forward. Order book in EPC remains healthy. BJE is now focusing in its NIRLEP brand, and it is expected to launch slew of products from 1st half of September ahead of festive season. BJE has done soft launch of its Nex brands which will house its premium fans and the commercial launch will be towards the next summer season. Considering BJE spending on its R&D initiatives and spends on two of its brands Nirlep and Nex in the current fiscal we have moderated our margin estimates in Fy24 and expect BJE to deliver double digit exit margin in FY25. We now downgrade the stock to Neutral with PT of Rs1257 as the stock is fairly valued at the current juncture and would wait for better entry point into the stock.

We expect growth momentum in the consumer business to resume from Q3FY24 as BJE has been launching new SKUs across the categories at the premium end. BJE continues to gain market share across the product categories. Efficiency is expected to improve from FY25 as currently company will have to invest in its two brands. We however have trimmed our FY24 earnings on delay in passing on increased costs and some follow through expense of bringing logistics in-house. We build in FY22-25E Revenue/EBITDA/PAT CAGR of 13%/36%/49% and downgrade to Neutral with PT of Rs1,257 continuing to value the company at 35x. We expect the stock to re-rate with a further once there is sustainable improvement in profitability and pick-up in rural demand.

Result Highlights

*  Business Update – Revenue was lower than expected as muted demand environment and unseasonal rains have impacted sale of summer products and lighting de-grew on back of subdued demand.

* Margins – Consumer products margin was impacted on account of operating leverage not kicking in and under recovery in Fans owing to competitive forces in weak demand environment.

* In-house manufacturing – Company is witnessing higher inhouse manufacturing as it is focusing on the premium technological advance products which it is preferring to make in-house.

* New launches – Company is significantly steeping up its new launches and have launched 38 SKU’s in Q1 and it is ready with new product launch under its brand Nirlep.

To Read Complete Report & Disclaimer Click Here

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

Above views are of the author and not of the website kindly read disclaimer