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Result Synopsis

Consumer products (CP) business registered muted revenue growth of 3.7% on soft demand for kitchen appliances. Summer products (Fans, air coolers) and Morphy Richards premium small domestic appliances demonstrated better growth. Margins were subdued on back of operating de-leverage and higher brand investments. The company has been aggressively launching new products large part of it at the premium end. On the lighting front growth in professional lighting was marginally offset by drop in consumer lighting. Company believes worst is behind them for the consumer products and there has been sequential improvement. The company has taken corrective actions which includes price hikes, cutting of excessive discounts and focus remains to protect the margins. We maintain our revenue estimates as kitchen which has been key category is seeing signs of improvement. Management is witnessing green shoots in rural demand which has been pain point of the company. We upgrade the stock to ADD with PT of Rs1,062 as 1) Management believes worst for the consumer products is behind; 2) BJE will protect margins by taking appropriate actions and 3) Green shoots visible in the rural market which is key for BJE. We now value the stock at 40x as rural is expected to do well in the coming time given the steps taken by government is aimed at improving rural consumption.

Demand has been alluding and now company believes appliances will start growing from the festive season. BJE has been on right path with more focus on preimmunizing its portfolio and launching more products at the premium end. We now bake in revenue growth of 20% and 10% for FY25 (on low base) and FY26 respectively. We upgrade the stock to ADD with PT of Rs1,062 valuing the company at 40x. We expect the stock to rerate once there is sustainable improvement in profitability and pick-up in rural demand.

Result Highlights

* Business Update – Revenue growth at 3.8% yoy has been muted as there has been soft demand for kitchen appliances and high single digit growth for fans as subeconomy fans have seen slower growth.

* Margins – Higher brand investments and operating de-leverage results in subdued EBITDA despite 146bps gross margin expansion.

* A&P Spends & Price hikes – A&P spends remains on the higher side ~4% of sales. The company has initiated ~3% price increase from mid-May.

* New launches – Company continues to step up new launches at the premium end with more focus on the Nex brand. The company has launched 48 SKU’s in the Fans and the Appliances segment, 7 in Morphy Richards, 12 SKU’s in Kitchen space and 11 SKU’s in Nex brand.

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