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Add This Midcap Bajaj Group Stock With Rs. 1230 Target Price, Says ICICI Direct

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ICICI Direct, a top brokerage firm recommends investors to add the stock of Bajaj Electricals. The firm model for Bajaj Electricals revenue and PAT CAGRs of 16.9% and 42.5% respectively over FY22-FY24E, and RoCE at >16% by FY24E.

 

Stock To Add: Target Price

Stock To Add: Target Price

The Current Market Price (CMP) of Bajaj Electricals is Rs. 1144. ICICI Direct has estimated a Target Price for the stock at Rs. 1230. It is a mid-cap stock with a market capitalization of around Rs. 12,841 crore. This stock has the potential to give 7.5% return, in the upcoming 1 year.

Stock Outlook 
Current Market Price (CMP)Rs. 1144
Target PriceRs. 1230
Potential 1 year return7.50%
52 week high share priceRs. 1,562
52 week low share priceRs. 858.55
Financials

Financials

The company's net sales in FY22 was recorded at Rs. 48,130 mn, which is expected to be at Rs. 57,259 mn in FY23. Their EBITDA in FY22 stood at Rs. 47.4 mn, which is expected to be at Rs. 31.4 mn in FY23. The company's adj. net profit in FY22 was recorded at Rs. 1,418 mn, which is expected to be at Rs. 2,216 mn in FY23.

Stock Advantages: ICICI Direct
 

Stock Advantages: ICICI Direct

According to ICICI Direct, "Maintain ADD with an unchanged DCF-based target price of Rs. 1,230 (implied P/E 44x FY24E EPS). However, key risks are sharp increase in input prices and competitive pressures. Bajaj Electricals might face revenue growth pressures in the remaining period of FY23E due to muted demand from rural markets (company has relatively higher exposure to rural markets), lower offtake in economy segment; and sluggishness in the kitchen appliances market. However, we model overall margin to expand considering higher scale for lighting segment and correction in input prices. We also note the company is introducing multiple products in fans and the initial consumer/ trade feedback is positive."

Distribution expansion

Distribution expansion

Bajaj Electricals is the most penetrated player in India's consumer electrical space with presence across 0.23mn outlets (universe: 0.35mn). While the top 50,000 outlets contribute 80% of the total industry-wide sales (source: company), expansion of sales through the smaller outlets is indispensable for driving volume growth in tier-3 and lower areas.

Demand

Demand

 

Our discussions with the company, industry and channel checks suggest slow demand from tiers 3 and 4 and rural areas in July-Aug, 2022. However, we note premium products and tier 1 and 2 cities continued to report healthy growth. The demand for economy segment products remain muted. We expect the company's volume growth to be impacted due to higher exposure to rural areas.

Company Portfolio:

Company Portfolio:

Retail outlets universe of consumer electrical products in India is close to 0.35mn. Bajaj Electricals continues to be the most penetrated company with presence in 0.23mn outlets. Bajaj Electricals Limited (BEL), a globally renowned and trusted company is a part of Bajaj Group. Bajaj Electricals business is spread across - Consumer Products (Appliances, Fans, Lighting), Exports, and EPC (Illumination, Transmission Towers and Power Distribution). With 20 branch offices and approximately 500 customer care centres, we are scattered in different parts of the country. They also have a presence in premium home appliances and cookware segments with brands like Morphy Richards and Nirlep.

Disclaimer

Disclaimer

The above stock was picked from the brokerage report of ICICI Direct. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.

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