Neutral Bosch Ltd for the Target Rs 43,728 by Motilal Oswal Financial Services Ltd
Strong performance Well-placed to benefit from upcoming regulations
* Bosch (BOS) delivered strong performance across the board in 1QFY27, which led to a beat on our estimates. Strong revenue growth (+22%), coupled with lower-than-expected expenses, led to EBITDA margin expansion of 60bp YoY to 14%, which beat our estimate (12.2%). This led to a beat on earnings, with PAT growing 1.3% YoY to INR7b (vs estimated INR5.3b).
* Given the better-than-expected performance in 1Q, we have raised our estimates by 11%/5% over FY27E/FY28E. We project BOS to clock a 26%/31%/17% CAGR in revenue/EBITDA/PAT over FY26-28. However, the stock at 44.6x/41.4x FY27E/FY28E appears fairly valued. We reiterate our Neutral rating with a TP of INR43,728 (based on ~40x FY28E EPS)
Strong performance leads to a beat across the board
* BOS’ net revenue in 1QFY27 beat our estimate, growing ~22% YoY to INR58.4b (est. INR53.2b), led by strong performance in the automotive segment, especially Power Solutions and 2W Powersports businesses.
* Mobility business grew 25.7% YoY, driven by 29% growth in Power Solutions and a strong 41.4% YoY growth in the 2W segment. The Consumer Goods segment grew relatively slower at 20.9% YoY.
* Gross margin contracted ~420bp YoY (down 130bp QoQ) to 33.5%, below our estimate of 35%.
* EBITDA margin came in at 14% (+65bp YoY and -40bp QoQ), ahead of our estimate of 12.2%. Margin beat was driven by a strong revenue growth and optimization of expenses. Both employee and other expenses came in lower than our expectations.
* As a result, EBITDA beat our estimate, rising ~28% YoY to INR8.2b (vs estimate of INR6.5b).
* This strong revenue and margin performance led to PAT beating our estimate, growing marginally 1.3% YoY to INR7b (vs our estimate of INR5.3b).
Valuation and view
Given the better-than-expected performance in 1Q, we have raised our estimates by 11%/5% over FY27E/FY28E. We project BOS to clock a 26%/31%/17% CAGR in revenue/EBITDA/PAT over FY26-28. The stock at 44.6x/41.4x FY27E/FY28E appears fairly valued. We reiterate our Neutral rating with a TP of INR43,728 (based on ~40x FY28E EPS)
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