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Result Synopsis

Consumer products (CP) business registered flattish revenue growth of 1.2% on single-digit de-growth in fans and flattish growth in Appliances, while Morphy Richards premium small domestic appliances demonstrated double-digit growth. Margins were subdued on back of reversal in warranty provision of Rs210mn coupled with 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. There has been double digit volume growth and high single digit value growth in focus lighting categories. Fans de-growth is attributed to price increase by the company in 1Q which has not gone well with the market and company has lost some market share. Margins will continue to remain at lower levels as company continues to invest in brand and new launches and will take 3-4 more quarters for investments to normalize. BJE has seen good start to the festive season, with October registering strong growth. We downgrade the stock to SELL with PT of Rs820 as 1) BJE has high dependency on the economy fans where it has undertaken price increase resulting in market share loss; 2) Consumer product margins will be lower for next 3-4 quarters given the investment in brand and product launches 3) Appliances segment which is the key growth driver is facing industrywide slowdown. We roll forward our target multiple to FY27 and now value the company at 35x given the challenges the company is facing. We downgrade the stock to SELL with PT of Rs820.

Demand has been alluding in the appliances segment and now with fans segment witnessing market share loss. Moreover, margins are expected to be on the lower side given the continued higher brand investments. BJE has been on right path with more focus on preimmunizing its portfolio and launching more products at the premium end, however, mix improvement will take time. We now bake in revenue growth of 11% each for FY26 and FY27 with EBITDA margin of 8.5% in FY27. We downgrade the stock to SELL with PT of Rs820 valuing the company at 35x.

Result Highlights

* Business Update – Flattish revenue growth is attributed to single digit decline in Fans and flattish growth in Appliances.

* Margins – Higher brand investments, operating de-leverage and reversal of warranty provision has resulted in subdued EBITDA despite 71bps gross margin expansion.

* Higher other expenses – Other expenses has shot up on back of reversal in warranty provision couple with higher investment in brand and product launches.

* New launches – Company continues to step up new launches at the premium end with more focus on the Nex brand. The company has launched 30 SKU’s in the Fans and the Appliances segment, 4 in Morphy Richards, 9 SKU’s in Kitchen space and 11 SKU’s in Nex brand.

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