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Decent overall performance: Orient Electric revenue from operations came in at Rs 567 Cr, up by 11% YoY. The in revenue was mainly led by healthy growth in its fans category which witnessed healthy demand. Amongst segments, Electrical Consumer Durables (ECD) contribution to revenue was 64.1% of the overall revenue at Rs 363 Cr, up by 17.2%. Its Lighting and Switchgears contribution to the revenue was 35.9% at Rs 203 Cr, marginally up by up by 1.4% YoY. PAT was at Rs 18.4 Cr, supported by the sale of its land parcel.

Mixed margins performance: Its gross profit stood at Rs 172 Cr, up by 27.9% YoY while gross margin improved by 400bps YoY to 30.3%, supported by decline in price of key raw materials while the cost optimization measures through project Sanchay aided the margin expansion further. EBITDA was reported at Rs 21 Cr experiencing a growth of 78% YoY and margin expansion of 137bps YoY to 3.6%. Despite the decline in the price of key raw material and cost optimization measures, the pace of EBITDA margin expansion was offset by investment and brand building expenses.

Segmental operational performance: ECD revenue was up by 17.2% YoY while its EBIT was up by a healthy 116.6% YoY to Rs 30 Cr. The growth in ECD segments was primarily driven by robust demand for fans as well as 2x growth in its DTM channel. Lighting and Switchgear revenue was marginally up by 1.4% YoY mainly due to muted B2C growth and price revisions in LED, however, EBIT was up by 18.5% YoY to Rs 27 Cr.

Delay in Hyderabad facility commencement: The company indicated that the Hyderabad facility will be operational at the beginning of Q4FY24. The delay in the commencement is due to difficulty in necessary visa approvals for its few foreign technicians. Going ahead, the management has indicated that this facility will be beneficial for fans category and also tap the international market which shall aid in revenue growth in FY25

Key concall & other highlights: 1) Continues to maintain strong presence in North and Eastern markets. 2) Company indicated that Hyderabad facility will require a capex of ~Rs 200 Cr while maintenance capex for FY24 will be ~Rs 60 Cr. 3) Inventory build-up due to festive period which shall aid in revenue growth. 4) BLDC and TPW fans witnessed double digit growth with premium fans contributing ~40% of the revenue. 5) Demand for fans in exports markets was driven by TPW category

Outlook & Valuations: Orient has diversified range of product categories in its ECD segment and Lighting & Switchgears segment with robust distribution network across India. The company is under the process of expanding its fans capacity with the commencement of Hyderabad facility which will prove to be the next leg of growth for the company. The upcoming festive period followed by summer season shall prove favorable for its overall category of products eventually driving the revenue growth. Financially, we estimate its revenue/EBITDA/PAT to grow at a CAGR of 16.5%/32.7%/43.1% over FY23-25E and recommend Buy rating with a target price of Rs 271 valuing the company at 37x on FY25E EPS.

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SEBI Registration number is INZ000174330