india morning bell 4th december 2014

7/26/2019 India Morning Bell 4th December 2014

1/14

India I Equities

Anand Rathi Shares and Stock Brokers Limited (hereinafter ARSSBL) is a full service brokerage and equities research firm and the views expressed therein are solelyof ARSSBL and not of the companies which have been covered in the Research Report. This report is intended for the sole use of the Recipient and is to be circulatedonly within India and to no countries outside India. Disclosures and analyst certifications are present in Appendix.

Anand Rathi Research India Equities

Country

Daily

4 December 2014

India Morning Bell

All the latest research and data

Fortis Healthcare Divestments now behind, focus on margins;Hold.To address its key concern and de-leverage its balance sheet, thecompany has taken various steps such as diluting its stake in the ReligareHealth Trust, sale of the Dental Corp. subsidiary, an institutionalplacement programme, the recent divestment of Hoan My Vietnam,

Quality Healthcare HongKong and RadLink-Asia Pte Ltd, Singapore.This would help reduce leverage and focus on the fast-growing domesticbusiness. Net debt has already come down to `12.1bn vs `29.6bn a yearago, implying net debt-to-equity of 0.24x now. Hence, interest cost ahead

would slide, boosting profitability. For FY16 we cut our revenue estimate2.4%, and FY15 and FY16 EBITDA respectively 4.8% and 3.2% tofactor in higher business-trust costs and the divestment of itsinternational businesses.

Bajaj Electricals Margins to be constrained; subduedperformance; Sell. We slash our FY15e/FY16e earnings because ofthe lower sales and the EBITDA-margin decline. We expect earnings

growth to pick up in FY16 and FY17 because of more profitable ordersin hand (in E&P). The company plans capex of ~`400m on R&D inFY15. We have introduced estimates for FY17. Due to the subduedperformance, we maintain our Sell on the stock. Assigning a PE of 15xto FY17e earnings, we arrive at a target of `225.

India: Repo and reverse-repo rates unchanged

Source: The RBI, Anand Rathi Research

Chartoftheday

Markets3 Dec 14 1 Day YTD

Sensex 28443 0.0% 34.3%Nifty 8538 0.2% 35.4%Dow Jones 17913 0.2% 8.1%S & P 500 2074 0.4% 12.2%FTSE 6717 -0.4% -0.5%Nikkei* 17845 0.6% 9.5%Hang Seng* 23517 0.5% 0.9%

Volumes (US$m)3 Dec 14 1 Day Avg '14

Cash BSE 636 21.3% 526Cash NSE 3,132 13.7% 2,643Derivatives (NSE) 22,318 -30.0% 32,107

Flows (US$m)3 Dec 14* MTD YTD

FII Cash

Buy 769 2,046 136,724Sell 705 1,967 121,892Net 63 78 16,364

FII - Derivatives

Buy 2,443 8,874 815,449Sell 2,512 9,359 804,641Net -69 -485 10,115

DII Cash

Buy 319 818 27,972Sell 345 939 25,500Net -25 -122 2,238

Others3 Dec 14 1 Day YTD

Oil Brent (US$/bbl)* 70.3 0.5% -33.6%Gold (US$/oz)* 1,208.5 -0.1% 0.2%Steel (US$/MT) 572.5 -3.8% -2.1%`/US$ 61.9 0.0% -0.2%US$/Euro* 1.2 0.0% 11.6%Yen/US$* 119.8 0.0% -12.1%Call Rate 8.0% 5.bps -75.bps10-year G-Secs 8.0% .bps -85.2bps

EMBI spreads 354.13 1.4bps 19.9bps

@7:30am *Provisional Source: BSE, Bloomberg

Sensex: 28443

Nifty: 8538


2/14

4 December 2014 India Morning Bell


Market Data

Price Performance Price Performance Price Performance

Top-5 gainers Top-5 gainers Top-5 gainers

Company CMP (INR) 1 wk (%) 1 Mth (%) Company CMP (INR) 1 wk (%) 1 Mth (%) Company CMP (INR) 1 wk (%) 1 Mth (%)

BERGER PAINTS 424 19.5 6.6 JET AIRWAYS IND 378 54.4 62.7 SPICEJET LTD 21 39.6 50.0

WOCKHARDT LTD 936 15.6 23.5 GULF OIL LUBRICA 505 34.1 52.7 TAKE SOLUTIONS 56 39.1 37.1

EXIDE INDUS LTD 174 14.7 10.7 STRIDES ARCOLAB 911 23.8 36.7 SEQUENT SCIENTIF 536 27.5 19.0

PUNJAB NATL BANK 1096 13.6 17.7 BAJAJ CORP LTD 353 16.0 24.2 ATUL AUTO LTD 556 26.6 38.7

ORIENTAL BANK OF 310 13.4 8.6 ZYDUS WELLNESS 801 14.8 27.7 ONMOBILE GLOBAL 70 26.0 78.0

Top-5 losers Top-5 losers Top-5 losers

Company CMP (INR) 1 wk (%) 1 Mth (%) Company CMP (INR) 1 wk (%) 1 Mth (%) Company CMP (INR) 1 wk (%) 1 Mth (%)

VEDANTA RESOURCE 681 (14.9) (15.7) SUZLON ENERGY 13 (9.6) (2.2) KAILASH AUTO FIN 12 (22.3) (56.4)

CONTAINER CORP 1325 (8.6) (2.0) ABAN OFFSHORE 543 (8.4) (13.0) NITIN FIRE PROT 33 (11.8) (30.2)

GMR INFRASTRUCTU 18 (8.5) (15.0) KAVERI SEED 844 (7.5) (8.5) RS SOFTWARE INDI 542 (10.4) (15.9)

OIL & NATURAL GA 361 (6.7) (11.0) JK CEMENTS LTD 606 (6.7) 0.3 GUJARAT NATURAL 182 (8.7) (10.9)

NATIONAL ALUMIN 58 (6.6) 1.0 FUTURE RETAIL LT 85 (5.7) (25.5) GAMMON INFRASTRU 15 (8.4) 0.7

Volume Volume Volume

Volume spurts Volume spurts Volume spurts

Company CMP (INR) 1 wk avg 1/4 wk (%) Company CMP (INR) 1 wk avg 1/4 wk (%) Company CMP (INR) 1 wk avg 1/4 wk (%)

GUJARAT GAS CO 594 1,280,553 191.4 MOTILAL OSWAL 259 271,523 171.4 ICVL CHEMICALS L 195 1,518 282.9

OBEROI REALTY 258 1,115,807 171.7 GULF OIL LUBRICA 505 547,895 150.6 TAKE SOLUTIONS 56 2,238,107 266.4

CROMPTON GREAVES 189 24,660,992 157.0 STRIDES ARCOLAB 911 1,177,743 141.8 TRIBHOVANDAS BHI 169 591,423 173.4

BERGER PAINTS 424 1,471,113 135.9 JET AIRWAYS IND 378 8,013,150 133.7 GOODYEAR INDIA 659 129,274 134.1

MRF LTD 34,281 26,418 81.6 SUN PHARMA ADV 200 1,301,477 124.1 ATUL AUTO LTD 556 1,010,260 127.5

Technicals Technicals Technicals

Above 200 DMA Above 200 DMA Above 200 DMA

Company CMP (INR) 200D Avg (%) Company CMP (INR) 200D Avg (%) Company CMP (INR) 200D Avg (%)

NATIONAL BUILDIN 800 429 85.3 BOMBAY BURMAH TR 457 182 151.2 ICVL CHEMICALS L 195 53 263.3

WHIRLPOOL OF IND 641 359 78.8 # CENTURY PLYBOARD 163 80 104.3 EXDON TRADING CO 308 85 259.4

AJANTA PHARMA 2,403 1,465 64.4 # JK TYRE & IND LT 639 319 99.5 V ISAGAR POLYTEX 805 234 253.3EICHER MOTORS 14,359 8,901 61.1 # GATI LTD 269 138 95.7 KAMALAKSHI FINAN 439 126 245.7

ASHOK LEYLAND 55 34 60.8 KITEX GARMENTS 523.7 285.6 82.3 SAFAL HERBS LTD 71 25 171.0

Below 200 DMA Below 200 DMA Below 200 DMA

Company CMP (INR) 200D Avg (%) Company CMP (INR) 200D Avg (%) Company CMP (INR) 200D Avg (%)

JINDAL STEEL & P 142 250 (42.7) SUZLON ENERGY 13 19 (27.7) KAILASH AUTO FIN 12 33 (63.4)

JAIPRAKASH ASSOC 30 52 (42.2) PIPAVAV DEFENCE 35 47 (25.1) SKIL INFRASTRUCT 29 54 (47.6)

VEDANTA RESOURCE 681 972 (30.0) FUTURE RETAIL LT 85 113 (24.5) KAPPAC PHARMA 262 421 (38.2)

GMR INFRASTRUCTU 18 26 (27.3) JAYPEE INFRATECH 21 27 (22.6) ESS DEE ALUMINIU 352 539 (34.6)

CAIRN INDIA 260 326 (20.2) JAIPRAKASH POWER 13 17 (21.2) FINANCIAL TECHNO 188 270 (30.5)

Small Caps(US$100m-250m)

Large Caps(>US$1bn)

Mid Caps(US$250m-1bn)

Source: Bloomberg


3/14

Anand Rathi Shares and Stock Brokers Limited (hereinafter ARSSBL) is a full service brokerage and equities research firm and the views expressed therein are solely ofARSSBL and not of the companies which have been covered in the Research Report. This report is intended for the sole use of the Recipient and is to be circulated only withinIndia and to no countries outside India. Disclosures and analyst certifications are present in Appendix.


India I Equities

m

Healthcare

Company Update

`

Rating: Hold

Target Price:`125

Share Price:`107

Key data FORH IN / FOHE.BO

52-week high / low `136 /`93

Sensex / Nifty 28443/8537

3-m average volume US$1.0m

Market cap `49.6bn / US$0.8bn

Shares outstanding 462..8

Shareholding pattern (%) Sep14 Jun 14 Mar 14

Promoters 71.34 71.34 71.34

- of which, Pledged 74.44 82.55 69.6

Free Float 28.66 28.66 28.66

- Foreign Institutions 9.04 8.84 9.09

- Domestic Insti tutions 0.31 0.3 0.79

- Public 19.31 19.52 18.78

4 December 2014

Fortis Healthcare

Divestments now behind, focus on margins; Hold

Key takeaways

Focus back on India. In 2QFY15 Fortis Healthcare announced its RedLink-Asia Pte Ltd, Singapore, divestiture to Medi-Rad Associates for SG$137m.This is in line with the companys strategy to focus on its domestic businesses.After this divestment, the company does not have any internationaloperations. We view this as positive development and expect growth and

margins to improve ahead.

Weak 2QFY15.2QFY15 revenue declined 19.5% yoy to`10.3bn. However,consolidated revenue at its India business grew 11% yoy to `9.78bn. TheEBITDA margin slid 563bps yoy to 1.3%. Net loss came at `535m, chieflydue to higher SG&A expenses, including business-trust costs. The domestichospitals division posted a strong, 12.6% yoy, rise in revenue, and the SRLbusiness grew 5.8% yoy.

Our take. To address its key concern and de-leverage its balance sheet, thecompany has taken various steps such as diluting its stake in the Religare HealthTrust (RHT), sale of the Dental Corp. subsidiary, an institutional placementprogramme, the recent divestment of Hoan My Vietnam,Quality Healthcare

HongKong andRadLink-Asia Pte Ltd, Singapore. This would help reduce leverageand focus on the fast-growing domestic business. Net debt has already comedown to`12.1bn vs`29.6bn a year ago, implying net debt-to-equity of 0.24xnow. Hence, interest cost ahead would slide, boosting profitability. For FY16

we cut our revenue estimate 2.4%, and FY15 and FY16 EBITDA respectively4.8% and 3.2% to factor in higher business-trust costs and the divestment ofits international businesses.

The stock trades at 22.4x FY16e and 14x FY17e EV/EBITDA. We maintain aHold, with a revised price target of `125 based on 16x one-year-forwardEBITDA and `19 a share for the stake in RHT (earlier `116). Risks. Longgestation period and delay in commercialisation of the new beds.

Key financials (YE Mar) FY13 FY14 FY15e FY16e FY17e

Sales (`m) 60,516 47,593 41,932 45,853 51,307

Net profit (`m) -1,842 -1,654 -1,138 -31 1,234

EPS (`) -4.0 -3.6 -2.5 -0.1 2.7

Growth (%) NA NA NA NA NA

PE (x) -23.8 -30.0 -43.5 NA 40.2

P/B (x) 15.2 36.6 46.2 22.4 14.0

RoE (%) 1.2 1.2 1.0 0.9 0.8

RoCE (%) -5.3 -4.1 -2.5 -0.1 2.2

Dividend yield (%) 2.5 1.1 0.1 1.4 2.7

Net gearing (%) 0.0 0.0 0.0 0.0 0.0

Source: Company, Anand Rathi Research

Relative price performance

Fortis

Sensex

90

100

110

120

130

140

150

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Source: Bloomberg

Estimatesrevision (%) FY15e FY16e

Sales 0 (2.4)

EBITDA (4.8) (3.2)

EPS NA NA

Change in Estimates Target Reco


4/14

4 December 2014 Fortis Healthcare Divestments now behind, focus on margins; Hold

Anand Rathi Research 2

Quick Glance Financials and Valuations

Fig 1 Income statement ( m)Year-end: Mar FY13 FY14 FY15e FY16e FY17e

Net revenues 60,516 47,593 41,932 45,853 51,307

Revenue growth (%) 102.8 (21.4) (11.9) 9.4 11.9

- Oper. expenses 53,729 45,759 40,591 43,291 47,629

EBIDTA 6,787 1,834 1,341 2,562 3,678

EBITDA margin (%) 11.2 3.9 3.2 5.6 7.2

- Interest expenses 6,340 3,163 1,499 1,312 939

- Depreciation 3,706 2,479 2,303 2,462 2,525

+ Other income 1,570 1,706 903 1,038 1,194

- Tax 2,313 265 (312) (35) 281

Effective tax rate (%) 29.1 18.5 20.0 20.0 20.0

Reported PAT 5,644 1,166 (1,247) (139) 1,126

+/- Extraordinary items 9,646 3,533 0 0 0

+/- Minority interest 809 158 109 109 109

Adjusted PAT (1,842) (1,654) (1,138) (31) 1,234

Adj. FDEPS (`/sh) (4.0) (3.6) (2.5) (0.1) 2.7

Adj. FDEPS growth (%) NA NA NA NA NASource: Company, Anand Rathi Research

Fig 3 Cash-flow statement ( m)Year-end: Mar FY13 FY14 FY15e FY16e FY17e

PAT 5,644 1,166 (1,247) (139) 1,126

+ Non-cash items 3,706 2,479 2,303 2,462 2,525

Cash profit 9,350 3,645 1,056 2,323 3,651

- Incr./(Decr.) in WC (94) 882 (222) 235 273

Operating cash-flow 9,444 2,763 1,279 2,088 3,378

- Capex 1,396 (49,761) 2,454 2,500 2,500

Free cash-flow 8,047 52,524 (1,175) (412) 878

- Dividend 0 0 0 0 0

+ Equity raised 0 5,298 0 0 0

+ Debt raised (5,824) (44,574) 0 (5,000) (5,000)

- Investments 9,463 6,299 0 0 0

- Misc. items 8,207 (9,480) 6,223 5,085 5,053

Net cash-flow 968 (2,532) 5,048 (327) 931

+ Op. cash & bank bal. 4,149 5,117 2,585 7,633 7,306

Cl. cash & bank bal. 5,117 2,585 7,633 7,306 8,237Source: Company, Anand Rathi Research

Fig 5 EV/EBITDA band

15x20x25x28x

0

40,000

80,000

120,000

160,000

200,000

N

ov-07

M

ay-08

N

ov-08

M

ay-09

N

ov-09

M

ay-10

N

ov-10

M

ay-11

N

ov-11

M

ay-12

N

ov-12

M

ay-13

N

ov-13

M

ay-14

N

ov-14

(`m)

Source: Bloomberg, Anand Rathi Research

Fig 2 Balance sheet ( m)Year-end: Mar FY13 FY14 FY15e FY16e FY17e

Share capital 4,095 4,628 4,628 4,628 4,628

Reserves & surplus 33,013 38,196 43,172 48,117 54,296

Net worth 37,109 42,824 47,799 52,745 58,924

Minority interest 16,912 8,093 8,093 8,093 8,093

Total debt 64,650 20,076 20,076 15,076 10,076

Def. tax liab. (net) 261 350 350 350 350

Capital employed 118,932 71,342 76,318 76,263 77,442

Net fixed assets 95,179 42,939 43,090 43,127 43,102

Investments 11,874 18,174 18,174 18,174 18,174

- of which, Liquid 3,893 9,934 9,934 9,934 9,934

Net working capital 6,762 7,644 7,422 7,656 7,929

Cash and bank bal. 5,117 2,585 7,633 7,306 8,237

Capital deployed 118,932 71,342 76,318 76,263 77,442

Net debt 59,533 17,491 12,443 7,770 1,839

WC days (13.8) (5.7) 0.6 0.0 0.2

Book value (`/sh) 90.6 92.5 103.3 114.0 127.3Source: Company, Anand Rathi Research

Fig 4 Ratio analysis @ 107Year-end: Mar FY13 FY14 FY15e FY16e FY17e

P/E (x) (23.8) (30.0) (43.5) NA 40.2

P/B (x) 1.2 1.2 1.0 0.9 0.8

EV/EBITDA (x) 15.2 36.6 46.2 22.4 14.0

RoE (%) (5.3) (4.1) (2.5) (0.1) 2.2

RoCE (%) 2.5 1.1 0.1 1.4 2.7

Dividend yield (%) 0.0 0.0 0.0 0.0 0.0

Dividend payout (%) 0.0 0.0 0.0 0.0 0.0

Asset turnover (x) 0.6 0.5 0.4 0.4 0.5

Net Debt/Equity (x) 1.7 0.5 0.4 0.3 0.2

Net debt/EBITDA (x) 8.8 9.5 9.3 3.0 0.5

Net debt/Op. CF (x) 6.3 6.3 9.7 3.7 0.5

Interest coverage (x) 0.5 (0.2) (0.6) 0.1 1.2

P/CEPS (x) 23.5 60.1 42.5 20.4 13.2

EV/ sales (x) 1.7 1.4 1.5 1.3 1.0

M-cap/sales (x) 0.7 1.0 1.2 1.1 1.0Source: Company, Anand Rathi Research

Fig 6 Revenue breakup (FY15e)

Indian Hospitals

78%

International

4%

SRL

18%

Source: Anand Rathi Research


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Appendix

Analyst CertificationThe views expressed in this Research Report accurately reflect the personal views of the analyst(s) about the subject securities or issuers and no part of thecompensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the researchanalyst(s) in this report. The research analysts are bound by stringent internal regulations and also legal and statutory requirements of the Securities and ExchangeBoard of India (hereinafter SEBI) and the analysts compensation are completely delinked from all the other companies and/or entities of Anand Rathi, and haveno bearing whatsoever on any recommendation that they have given in the Research Report.

Important Disclosures on subject companiesRating and Target Price History (as of 3 December 2014)

Fortis

1 2 3

4

5 6

70

90

110

130

150

170

190

Jan-11

Mar-11

May-11

Aug-11

Oct-11

Jan-12

Mar-12

Jun-12

Aug-12

Nov-12

Jan-13

Apr-13

Jun-13

Sep-13

Nov-13

Jan-14

Apr-14

Jun-14

Sep-14

Nov-14

Date RatingTP()

SharePrice ()

1 24-Oct-11 Buy 160 1212 14-Feb-12 Hold 120 1073 11-Jun-12 Sell 102 1014 27-Dec-12 Sell 110 1175 13-Feb-13 Hold 118 1026 4-Jun-13 Hold 105 907 8-Oct-13 Hold 116 116

The research analysts, strategists, or research associates principally responsible for the preparation of Anand Rathi Research have received compensation basedupon various factors, including quality of research, investor client feedback, stock picking, competitive factors, firm revenues and overall investment bankingrevenues.

Anand Rathi Ratings Definitions

Analysts ratings and the corresponding expected returns take into account our definitions of Large Caps (>US$1bn) and Mid/Small Caps (US$1bn) >15% 5-15%


6/14

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7/14

Anand Rathi Shares and Stock Brokers Limited (hereinafter ARSSBL) is a full service brokerage and equities research firm and the views expressed therein are solely ofARSSBL and not of the companies which have been covered in the Research Report. This report is intended for the sole use of the Recipient and is to be circulated only withinIndia and to no countries outside India. Disclosures and analyst certifications are present in Appendix.


Consumer Durables

Company UpdateIndia I Equities

Key financials (YE Mar) FY13 FY14 FY15e FY16e FY17e

Sales (`m) 33,773 40,298 45,088 52,186 59,920

Net profit (`m) 314 (53) 605 1,269 1,493

EPS (`) 3.2 (0.5) 6.1 12.7 15.0

Growth (%) - - - 109.6 17.6

PE (x) 69.7 (412.8) 36.2 17.3 14.7

PBV (x) 3.0 3.1 3.0 2.6 2.3

RoE (%) 7.2 (0.7) 8.4 16.3 16.9

RoCE (%) 10.8 5.9 16.0 22.9 23.9

Dividend yield (%) 0.9 0.7 1.4 1.4 1.4

Net gearing (%) 11.0 31.4 49.3 45.3 46.4

Source: Company, Anand Rathi Research

`

4 December 2014

Bajaj ElectricalsMargins to be constrained; subdued performance; Sell

Key takeaways

Weak operating performance of all divisions. According to BajajElectricals management, dropping volumes resulted in shrinking consumer-durable margins in 2QFY15. Margins were hit by lower water-heater salesand sales of the fans division. The appliances division grew 4.3%; luminaires

was modest while lighting slowed down 10% due to lower offtake of CFLs.The CFL margin was squeezed by LED demand in the market picking up.

E&P division still under pressure; lighting, a drag. 2QFY15 revenuewas up 7.2% to`10.3bn. The E&P division revenue shot up 32.5% but itsEBIT margin was a negative 8.3% due to losses in its old and sticky projects.Provision of `130m has been made for those projects, and EBIT has beenhit by `75m because of bad debts. At present, this divisions order book is~`30bn. The lighting/consumer divisions EBIT margins slid 479/254bpsyoy.

Future guidance. Management has guided to no growth in the lightingdivision in 2HFY15, and decent growth in luminaires. Consumer durables isexpected to grow over 10%. The E&P division is expected to turn around in2H, with expected revenue of`15.5bn in FY15 (`5.5bn in 1H and`10bn in

2HFY15). The company expects a 17-18% gross margin in this business.The greater inventory has hit the companys bottom line. To enhance brandvisibility, ad-spend in FY15 would be ~`0.63bn.

Our take.We slash our FY15e/FY16e earnings because of the lower salesand the EBITDA-margin decline. We expect earnings growth to pick up inFY16 and FY17 because of more profitable orders in hand (in E&P). Thecompany plans capex of ~`400m on R&D in FY15. We have introducedestimates for FY17. Due to the subdued performance, we maintain our Sellon the stock. Assigning a PE of 15x to FY17e earnings, we arrive at a targetof`225. Risks.Better performance of the E&P division, greater demand forelectrical appliances.

Rating: Sell

Target Price:`225

Share Price:`220

Key data BJE IN / BJEL.BO

52-week high / low `385 /`160

Sensex / Nifty 28265 /8445

3-m average volume US$0.5m

Market cap `22.3bn / US$0.36bn

Shares outstanding 99.9m

Shareholding pattern (%) Sep14 Jun14 Mar14

Promoters 65.6 65.9 66.1

- of which, Pledged - - -

Free Float 34.4 34.1 33.9

- Foreign Institutions 14.0 16.2 14.6

- Domestic Institutions 6.0 3.8 3.8

- Public 14.3 13.9 15.4

Change in Estimates Target Reco

Estimates revision (%) FY15e FY16e

Sales (4.4) (5.0)

EBITDA (30.9) (9.2)

EPS (55.3) (23.4)

Relative price performance

BJE

Sensex

150

200

250

300

350

400

Dec-1

3

Jan-1

4

Feb

-14

Mar-14

Apr-14

May-1

4

Jun-1

4

Jul-14

Aug-1

4

Sep-1

4

Oct-14

Nov-1

4

Dec-1

4

Source: Bloomberg


8/14

4 December 2014 Bajaj Electricals Margins to be constrained; subdued performance; Sell


Quick Glance Financials and Valuations

Fig 1 Income statement ( m)Year-end: Mar FY13 FY14 FY15e FY16e FY17e

Net sales 33,773 40,298 45,088 52,186 59,920

Sales growth (%) 9.0 19.3 11.9 15.7 14.8

- Oper. expenses 32,665 39,480 42,937 48,846 56,085

EBIDTA 1,109 818 2,151 3,340 3,835

EBITDA margins (%) 3.3 2.0 4.8 6.4 6.4

- Interest 690 783 1,100 1,293 1,449

- Depreciation 145 248 330 367 396

+ Other income 168 153 169 186 205

- Tax 178 (7) 285 597 702

Effective tax rate (%) 25.8 10.9 32.0 32.0 32.0

Reported PAT 512 (53) 605 1,269 1,493

+/- Extraordinary items 198 - - - -

Adjusted PAT 314 (53) 605 1,269 1,493

Adj. FDEPS (`/sh) 3.2 (0.5) 6.1 12.7 15.0

Adj. FDEPS growth (%) (73.3) (116.9) (1,240.2) 109.6 17.6

DPS (`/sh) 2.00 1.50 3.00 3.00 3.00Source: Company, Anand Rathi Research

Fig 3 Cash-flow statement ( m)Year-end: Mar FY13 FY14 FY15e FY16e FY17e

PAT 512 (53) 605 1,269 1 ,493

+ Non-cash Items 85 74 330 367 396

Cash profit 597 20 935 1,636 1,889

- Incr./(Decr.) in WC (358) 868 1,475 1,005 1,862

Operating cash-flow 955 (848) (540) 632 26

- Capex 601 442 500 400 300

Free cash-flow 354 (1,290) (1,040) 232 (274)

- Dividend 233 175 350 350 350

+ Equity raised 9 37 (5) 0 (0)

+ Debt raised (311) 1,846 1,500 500 250

- Investments (143) 376 - - -

- Misc. items (3) - - - -

Net cash-flow (35) 43 105 382 (373)

+ Opening cash 536 501 544 649 1,031

Closing cash 501 544 649 1,031 658Source: Company, Anand Rathi Research

Fig 5 PE band

4x

8x

12x

16x

20x

-50

0

50

100

150

200

250

300

350

400

N

ov-08

M

ay-09

N

ov-09

M

ay-10

N

ov-10

M

ay-11

N

ov-11

M

ay-12

N

ov-12

M

ay-13

N

ov-13

M

ay-14

N

ov-14

BJE

(`)

Source: Bloomberg, Anand Rathi Research

Fig 2 Balance sheet ( m)Year-end: Mar FY13 FY14 FY15e FY16e FY17e

Share capital 200 200 200 200 200

Reserves & surplus 7,087 6,891 7,147 8,066 9,209

Shareholders fund 7,286 7,091 7,347 8,266 9,409

Debt 1,600 3,447 4,947 5,447 5,697

Deferred Tax Liab (net) - - - - -

Minority interests - - - - -

Capital employed 8,887 10,543 12,293 13,713 15,106

Net Fixed assets 2,323 2,518 2,688 2,721 2,625

Investments 298 673 673 673 673

Working capital 5,686 6,554 8,029 9,034 10,896

Cash 501 544 649 1,031 658

Capital deployed 8,887 10,543 12,293 13,713 15,106

Net Debt 1,099.5 2,902.6 4,297.5 4,415.5 5,039.0

Net Debt/Equity (%) 11.0 31.4 49.3 45.3 46.4

W C turn (days) 63 55 59 60 61

Book value (`/sh) 73.2 71.3 73.8 83.1 94.6Source: Company, Anand Rathi Research

Fig 4 Ratio analysis @ 220Year-end: Mar FY13 FY14 FY15e FY16e FY17e

P/E (x) 69.7 (412.8) 36.2 17.3 14.7

P/B (x) 3.0 3.1 3.0 2.6 2.3

EV/Sales (x) 0.7 0.6 0.6 0.5 0.4

EV/EBITDA (x) 20.5 29.5 11.9 7.7 6.9

RoAE (%) 7.2 (0.7) 8.4 16.3 16.9

RoACE (%) 10.8 5.9 16.0 22.9 23.9

Dividend yield (%) 0.9 0.7 1.4 1.4 1.4

Dividend payout (%) 45.5 (329.3) 57.8 27.6 23.4

Cash PE 33.4 112.8 23.4 13.4 11.6

Debt/ Equity (x) 0.22 0.49 0.67 0.66 0.61

Debtors Days 110.6 98.8 111.2 109.3 109.4

Inventory Days 42.0 39.3 38.0 37.0 37.0

Payable days 149.3 156.0 175.0 172.0 173.0

WC days 63.4 55.4 59.0 59.7 60.7

F.A Turnover(x) 14.5 16.0 16.8 19.2 22.8Source: Company, Anand Rathi Research

Fig 6 FY14 revenue break-up

Consumer

Durables (Incl.

Fans)

47%

Engineering &

Projects

29%

Lighting &

Luminaires

24%

Source: Company


9/14



Weak performance, segment-wise

Fig 7 Quarterly Results vs Estimates ( m)Quarterly results 2QFY14 2QFY15 % var (yoy) 1QFY15 % var (qoq) 2QFY15e % var (est)

Sales 9,602 10,295 7.2 8,876 16.0 10,823 (4.9)

EBIDTA (16) 98 718.2 369 (73.3) 588 (83.3)

PBT (231) (203) 12.1 76 (366.8) 300 (167.7)

Adj. PAT (154) (142) 7.7 56 (352.4) 201 (170.7)

Source: Company.

Bajaj Electricals 2QFY15 revenue rose 7.2% yoy to`10.3bn (`9.6bn a yearago) following 32.5% revenue growth in its E&P division. The EBIDTAmargin was 1% (-0.2% a year ago). Despite the revenue growth in the E&Pdivision, the 2QFY15 EBIT loss came at `281m (`433m in 2QFY14). In2QFY15 the company reported a net loss of `142m, chiefly because of thelighting divisions lower margins. Capital employed was`12.1bn (`9.7bn lastyear). Management had guided to reducing capital employed in the E&P

division as well as improving the margin there in FY15 since many old andsticky projects have been executed and new orders have been received.

Segment-wise performance

Fig 8 Segment-wise revenue ( m)2QFY14 2QFY15 % var (yoy) 1QFY15 % var (qoq) 1HFY14 1HFY15 % var

Lighting & Luminaires 2,509 2,260 (10.0) 1,686 34.0 4,083 3,946 (3.4)

Consumer Durables 4,539 4,657 2.6 5,046 (7.7) 8,906 9,703 9.0

Engineering & Projects 2,545 3,373 32.5 2,142 57.4 4,438 5,515 24.3

Source: Company

Fig 9 Segment-wise margins (%)2QFY14 2QFY15 % var (yoy) 1QFY15 % var (qoq) 1 HFY14 1HFY15 % var

Lighting & Luminaires 7.6 2.8 (479)bps 1.5 137bps 6.6 2.3 (431)bps

Consumer Durables 8.5 6.0 (254)bps 6.9 (89)bps 8.9 6.4 (243)bps

Engineering & Projects (17.0) (8.3) 868bps (2.8) (557)bps (15.6) (6.2) 942bps

Source: Company

Other Highlights

The company did not see good growth in its consumer-durablesdivision, and its fans have declined 4.7%.

It recruited 250 people in the last six months to execute the newprojects; this has increased fixed costs by ~`40m.

It is fairly confident of launching better products in FY15. Themanagement is focusing on increasing sales through campaigns, andimproving profitability.


10/14



Fig 10 Lighting and Luminaires: slow revenue growth

500

1,000

1,500

2,000

2,500

3,000

1QFY10

2QFY10

3QFY10

4QFY10

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

2QFY14

3QFY14

4QFY14

1QFY15

2QFY15

-15

0

15

30

45

60

Revenue Growth (RHS)

(`m) (%)

Source: Company

Fig 11 Lighting and Luminaires: margin decline

0

50

100

150

200

250

300

1QFY10

2QFY10

3QFY10

4QFY10

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

2QFY14

3QFY14

4QFY14

1QFY15

2QFY15

0

2

4

6

8

10

12

EBIT EBIT Margin (RHS)

(`m) (%)

Source: Company

Fig 12 Consumer Durables: revenue grows at slower pace

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

1QFY10

2QFY10

3QFY10

4QFY10

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

2QFY14

3QFY14

4QFY14

1QFY15

2QFY15

-5

0

5

10

15

20

25

30

35

40

45


(`m) (%)

Source: Company

Fig 13 Consumer Durables: margin drops

100

200

300

400

500

600

700

1QFY10

2QFY10

3QFY10

4QFY10

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

2QFY14

3QFY14

4QFY14

1QFY15

2QFY15

7.0

8.0

9.0

10.0

11.0

12.0

13.0

14.0

15.0


(`m) (%)

Source: Company

Fig 14 E&P: revenue rises sharply

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

1QFY10

2QFY10

3QFY10

4QFY10

1QFY11

2QFY11

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2QFY13

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2QFY14

3QFY14

4QFY14

1QFY15

2QFY15

-40

-20

0

20

40

60

80

100


(`m) (%)

Source: Company

Fig 15 E&P: EBIT margin still in the red

-600

-500-400

-300

-200

-100

0

100

200

300

400

500

1QFY10

2QFY10

3QFY10

4QFY10

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

2QFY14

3QFY14

4QFY14

1QFY15

2QFY15

-30

-25

-20

-15

-10

-5

0

5

10

15


(`m) (%)

Source: Company


11/14



Valuation

Fig 16 Change in estimates

FY15 FY16

Year end : Mar New Old % Chg New Old % Chg

Net Sales (` m) 45,088 47,184 (4.4) 52,186 54,909 (5.0)

EBIDTA (` m) 2,151 3,114 (30.9) 3,340 3,679 (9.2)

EBIDTA margins (%) 4.8 6.6 (183)bps 6.4 6.7 (30) bps

Adj. PAT (` m) 605 1,356 (55.3) 1,269 1,650 (23.1)

Source: Anand Rathi Research

In view of the declining operating performance and softened guidance bymanagement, we slash our FY15 and FY16 profit expectations, respectively,55% and 23.4%. We assign a PE of 15x to FY17e and arrive at a target of`225. We maintain a Sell on the stock. It trades at a PE of 17.3x FY16e and14.7x FY17e.

Risks

Turnaround in the E&P business.

Greater demand for electrical appliances.


12/14

Appendix

Analyst CertificationThe views expressed in this Research Report accurately reflect the personal views of the analyst(s) about the subject securities or issuers and no part of thecompensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the researchanalyst(s) in this report. The research analysts are bound by stringent internal regulations and also legal and statutory requirements of the Securities and ExchangeBoard of India (hereinafter SEBI) and the analysts compensation are completely delinked from all the other companies and/or entities of Anand Rathi, and haveno bearing whatsoever on any recommendation that they have given in the Research Report.

Important Disclosures on subject companiesRating and Target Price History (as of 1 December 2014)

Bajaj Electrical

9

1

2

3 45

6

7

8

10

60

110

160

210

260

310

360

410

Jan-11

Apr-11

Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Sep-12

Dec-12

Mar-13

Jun-13

Sep-13

Dec-13

Mar-14

Jun-14

Aug-14

Nov-14

Date RatingTP()

SharePrice ()

1 22-Dec-11 Buy 193 1362 29-May-12 Sell 180 1973 30-Jul-12 Sell 171 1734 20-Sep-12 Sell 174 1915 10-Apr-13 Sell 177 1686 10-Jul-13 Sell 165 1747 13-Aug-13 Sell 163 1598 12-Feb-14 Hold 242 2329 30-May-14 Sell 249 319

The research analysts, strategists, or research associates principally responsible for the preparation of Anand Rathi Research have received compensation basedupon various factors, including quality of research, investor client feedback, stock picking, competitive factors, firm revenues and overall investment bankingrevenues.

Anand Rathi Ratings Definitions



13/14

Other Disclosures pertaining to distribution of research in the United States of America

This material was produced by ARSSBL, solely for information purposes and for the use of the recipient. It is not to be reproduced under any circumstances and isnot to be copied or made available to any person other than the recipient. It is distributed in the United States of America by Enclave Capital LLC (19 West 44thStreet, Suite 1700, New York, NY 10036) and elsewhere in the world by ARSSBL or an authorized affiliate of ARSSBL (such entities and any other entity, directlyor indirectly, controlled by ARSSBL, the Affiliates). This document does not constitute an offer of, or an invitation by or on behalf of ARSSBL or its Affiliates or anyother company to any person, to buy or sell any security. The information contained herein has been obtained from published information and other sources, whichARSSBL or its Affiliates consider to be reliable. None of ARSSBL or its Affiliates accepts any liability or responsibility whatsoever for the accuracy or completenessof any such information. All estimates, expressions of opinion and other subjective judgments contained herein are made as of the date of this document. Emerging

securities markets may be subject to risks significantly higher than more established markets. In particular, the political and economic environment, companypractices and market prices and volumes may be subject to significant variations. The ability to assess such risks may also be limited due to significantly lowerinformation quantity and quality. By accepting this document, you agree to be bound by all the foregoing provisions.

1. ARSSBL or its A ffiliates may or may not have been beneficial owners of the securities mentioned in this report.

2. ARSSBL or its affiliates may have or not managed or co-managed a public offering of the securities mentioned in the report in the past 12 months.

3. ARSSBL or its affiliates may have or not received compensation for investment banking services from the issuer of these securities in the past 12 months and donot expect to receive compensation for investment banking services from the issuer of these securities within the next three months.

4. However, one or more of ARSSBL or its Affiliates may, from time to time, have a long or short position in any of the securities mentioned herein and may buy orsell those securities or options thereon, either on their own account or on behalf of their clients.

5. As of the publication of this report, ARSSBL does not make a market in the subject securities.

6. ARSSBL or its Affiliates may or may not, to the extent permitted by law, act upon or use the above material or the conclusions stated above, or the research oranalysis on which they are based before the material is published to recipients and from time to time, provide investment banking, investment management or other

services for or solicit to seek to obtain investment banking, or other securities business from, any entity referred to in this report.

Enclave Capital LLC is distributing this document in the United States of America. ARSSBL accepts responsibility for its contents. Any US customer wishing toeffect transactions in any securities referred to herein or options thereon should do so only by contacting a representative of Enclave Capital LLC.

2014 Anand Rathi Shares and Stock Brokers Limited. All rights reserved. This report or any portion thereof may not be reprinted, sold or redistributed without theprior written consent of Anand Rathi Shares and Stock Brokers Limited.

Additional information on recommended securities/instruments is available on request.


14/14

Appendix

Analyst CertificationThe views expressed in this Research Report accurately reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the compensation of the researchanalyst(s) was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. The research analysts are bound bystringent internal regulations and also legal and statutory requirements of the Securities and Exchange Board of India (hereinafter SEBI) and the analysts compensation are completelydelinked from all the other companies and/or entities of Anand Rathi, and have no bearing whatsoever on any recommendation that they have given in the Research Report.

The research analysts, strategists, or research associates principally responsible for the preparation of Anand Rathi Research have received compensation based upon various factors,

including quality of research, investor client feedback, stock picking, competitive factors, firm revenues and overall investment banking revenues.Anand Rathi Ratings Definitions


india morning bell 4th december 2014

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