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BJE’s Q2FY24 revenue fell 4% YoY to Rs11.1bn, 7% below our estimate. Sales was impacted owing to muted consumer demand, shift in festive sales to Q3 and pricing constraints. Consumer Products revenue fell 3% YoY to Rs8.6bn as double digit growth in fans was offset by de-growth in appliances. Lighting sales fell 7% YoY to Rs2.6bn amid demand weakness and LED price erosion. BJE continues to de-risk its concentration on general trade (down 9% YoY), as it scale up alternate channels like modern retail (+28%), Institutional (+20%), CSD (+22%), E-commerce (+22%) and exports (+15%). Gross margin fell 100bps YoY to 29.7% while EBITDA margin fell 360bps YoY to 5.1%. Lower operating profit led to 46% YoY decline in PAT to Rs317mn, below our estimate of Rs472mn. BJE believes that once demand picks up, industry will stop discounting thus leading to healthy margin expansion. We trim our EPS estimate for FY24E/25E by 11%/10% and roll over valuation to Sept’25. Retain ADD rating with revised target of Rs1,120 (Rs1,200 earlier) based on P/E of 35x H1FY26E EPS.

Consumer Products: Fans growth offset by appliances de-growth

Consumer Products sales fell 3% YoY to Rs8.6bn with EBIT margin of 4.8%, down 220bps YoY. Fans growth was in healthy double digits but was offset by low double digit degrowth in Appliances and flat growth in Morphy Richards. BJE gained market share across fans, coolers and mixer grinders. Growth in fans were driven by new product launches while BJE didn’t take any price hikes. Share of premium fans is at 20% of total while subeconomy fans are at 55% of total fan sales. Since past four quarters, kitchen appliances industry’s growth is weak. BJE is addressing weakness in kitchen appliances through premiumization and growth in mixer grinders category. Appliances saw healthy growth in tertiary demand in October providing some comfort for primary offtake. Air coolers posted healthy double digit growth. The industry is currently undergoing heavy price discounting by major brands due to intense competition and low demand but would give it away once demand picks up. BJE believes that it has balanced the equation of growth vs. discounting vs. margin better than peers. BJE has increased its focus on brand awareness as ad-spends rose to 3% of sales in Q2FY24 vs. 2.3% YoY. Growth across key alternate channels were Modern format retail 28%, E-commerce 22%, Institutional 20%, CSD 22% and exports 15%.

Lighting: Weak consumer demand and LED price erosion impacts growth

Lighting sales fell 7% YoY to Rs2.6bn as segment faced demand headwinds as well as price erosion of 15-20% in B2C products due to reduction in input cost. Channel mix between B2C/B2B was at 40%/60% while trade/non-trade channel mix was at 57%/43%. EBIT margin contracted by 380bps YoY to 5.6% due to operating de-leverage.

Retain ADD rating with a revised target price of Rs1,120 We expect BJE to post 12% revenue CAGR over FY23-26E, while 120bps operating margin expansion and lower tax rate will drive 24% earnings CAGR. Maintain ADD with revised target of Rs1,120 based on P/E of 35x H1FY26E EPS.

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