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Orient Electric Ltd.

Decent overall performance: Orient Electric Q3FY24 revenue from operations was reported at Rs 752 Cr, up 1.7% YoY/32.6% QoQ. The demand in the appliances, lighting and switchgear segment remained stable while fans demand was subdued resulting in moderate growth as compared to last year. Amongst segments; Electrical Consumer Durables (ECD) revenue was Rs 535 Cr, down by 0.7% while it was up by 47.3% QoQ, consequently, Lighting & Switchgears grew by 8.2% YoY/6.5% QoQ to Rs 217 Cr

Mixed trend of margin: Gross profit grew by 6.2% YoY to Rs 225 Cr with a margin of 29.9% which expanded by 127bps, mainly due to decline in input cost and improved product mix in its sales. EBITDA was Rs 49 Cr, down by 10.8% YoY with a margin of 6.5% which declined by 92bps YoY due to mixed demand across segments resulting in operating deleverage while rise in investment across key areas kept the overheads cost higher.

Segmental performance: The softness in demand towards the ECD segment, price discounting along with expenses related to improving distribution channels led EBIT to decline by 6.5% YoY to Rs 60 Cr while margin declined by 71bps YoY to 11.3%. Similarly, Lighting & Switchgear EBIT declined by 1.4% YoY to Rs 31 Cr with a margin of 14.2% which declined by 120bps YoY.

Concall & Other key highlights: 1) The company has spent Rs 180 Cr towards the Hyderabad plant. 2) Launched 15 new products; 12 in Lighting segment and 3 in the ECD segment. 3) Its cost saving initiative project “Spark Sanchay” led to cost savings of Rs 45 Cr for 9MFY24. 4) Direct-to-Market (DTM) sales in 7 states grew by 36% YoY in the fans category. 5) Achieved highest ever quarterly revenue through digital business which is up by 100% YoY. 6) International business growth was in high teens, however, could see some blip due to the macro-economic environment. 7) The company expects the investments to aid in volume growth and margin expansion in the upcoming quarters.

Outlook & Valuations: Orient has a diversified range of product categories in its ECD segment and Lighting & Switchgears segment with robust distribution network across India. The sequential recovery in demand ahead of its key sales period and rise in real estate activities across India as well as its expansion of distribution network augurs well for its volume and revenue expansion across segments. Factoring this, we estimate its revenue/EBITDA/PAT to grow at a CAGR of 12.6%/26.4%/31.9% over FY23-26E and maintain Buy rating with a target price of Rs 271 valuing the company at 33x on FY26E EPS.

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SEBI Registration number is INZ000174330