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Margin-led operational beat; new initiatives in focus

Bajaj Electricals (BJE) reported consolidated revenue of INR 12.6bn for 4QFY25, reflecting a 7% YoY increase (vs. JMFe: 4%). Revenue growth was primarily driven by the Consumer Products segment, led by double-digit growth in domestic appliances. The Lighting Solutions segment posted a flat performance, with single-digit growth in Consumer Lighting offset by a decline in Professional Lighting due to delays in project execution. EBITDA came in at INR 930mn (vs. JMFe: INR 610mn), marking an increase of 87% YoY and 6% QoQ, with EBITDA margin of 7.3% (vs. JMFe: 5%), expanding by 310bps YoY and 60bps QoQ. Margin improvement was largely attributable to a 260bps YoY rise in gross margin and 110bps YoY reduction in other expenses, despite a 50bps YoY increase in staff costs. PAT increased 29% YoY to INR 377mn (vs. JMFe: INR 173mn) due to a normalised tax rate of 24.5% (vs. a tax refund in the base quarter). Reported PAT was INR 591mn, which includes an exceptional gain of INR 214mn. We cut our FY26/FY27 EPS estimates by 3-4% on lower-than-expected revenue degrowth, coupled with increase in depreciation and interest expense. We maintain BUY with target price of INR 780 (earlier INR 815) valued at 38x FY27 EPS.

* 4Q performance: Revenue increased 7.7% YoY to INR 12.6bn (vs. JMFe: 4%) supported by growth in Consumer Product segment. EBITDA stood at INR 930mn, up 87% YoY. Gross margin expanded to 31.9% from 29.3% (vs. JMFe GM: 31.5%), and EBITDA margin improved to 7.3% from 4.0% YoY (vs. JMFe EBITDAM: 5.0%); Depreciation was higher due to capitalisation of employee costs and new moulds. The company saw exceptional gain of INR 210mn (owing to sale of land of INR 300mn and offset by INR 90mn due to VRS for Nashik factory). BJE’s PAT rose by 29% YoY to INR 377mn.

* Consumer Products: Revenue for consumer products for the quarter increased by 8% YoY to ~INR 9.9bn (2% up vs. JMFe). Growth was driven by strong traction in domestic appliances, especially coolers, which posted high double-digit growth. Kitchen appliances, notably mixers, continued to face industry-wide demand softness. Morphy Richards continue to register high double-digit growth, CP EBIT margin expanded to 3.9% (vs. 1.8% YoY), largely due to a 360bps improvement in gross margin. For the next few years, the company’s focus will be to increase top line and market share while continuing to spend heavily on the brand and other initiatives.

* Lighting: Revenue for Lightning solution in 4Q was INR 2.7bn, flat YoY (5% up vs. JMFe) due to contraction in professional lighting (delays in order execution of urban rural bodies resulted in the contraction) which also had an impact on operating deleverage. Professional lighting order book remains healthy at INR 2.4bn,

* Overall guidance: FY26 capex could be ~INR 1bn, though the company is evaluating a new manufacturing facility, for which a budget of INR 3bn has been approved. If that materialises, total capex could rise to INR 4bn. Ad spend is likely to remain elevated at 4% of sales, compared to 3% last year, Overall, long-term margin improvement is expected from (1) 2/3% gain via operating leverage and (2) 2-3% from cost optimisation initiatives, including logistics efficiencies, VAVE, and GTM enhancements.

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