4QFY2012 Result Update | Cons.

Durables
May 29, 2012

Bajaj Electricals
Performance Highlights
Y/E March (` cr) Net sales EBITDA EBITDA (%) PAT 4QFY12 1,060 86 8.1 49.0 3QFY12 794 65 8.2 32.8 % chg (qoq) 33.6 33.1 (3)bp 49.2 4QFY11 980 102 10.4 57.5 % chg (yoy) 8.2 (15.3) (225)bp (14.7)

BUY
CMP Target Price Investment Period
Stock Info Sector Market Cap (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Cons. Durables 1,963 0.9 272/133 29,073 2 16,439 4,990 BJEL.BO BJE@IN

`197 `246 12 Months

Source: Company, Angel Research

Bajaj Electricals (BEL) posted modest top-line growth of 8.2% yoy to `1,060cr in 4QFY2012. The companys OPM for the quarter fell by 225bp yoy and declined by mere 3bp qoq to 8.1%. PAT for the quarter came in at `49cr, down 14.7% yoy. We recommend Buy on the stock. Top-line growth driven by the lighting and consumer durables segments: The lighting segment witnessed 23.1% yoy growth in revenue to `248cr and the consumer durable segment managed 10.4% yoy growth in revenue to `444cr. The engineering and projects (E&P) segment, however, witnessed a decline of 2.2% yoy in revenue to `368cr. The companys operating profit declined by 15.3% yoy to `86cr, largely due to margin compression. OPM fell by 225bp to 8.1%, mainly because of higher-than-expected other expenditure. The lighting segment witnessed a 140bp yoy increase in EBIT margin, while the consumer durable segment witnessed a 199bp yoy contraction in EBIT margin. The E&P segment reported EBIT of `21cr, down 48.2% yoy, while its margin declined by 497bp yoy to 5.6%, consequently bringing down the margin for the whole company. The companys PAT for the quarter came in at `49cr, down 14.7% yoy. Outlook and valuation: We believe consumer appliances and new product launches will fuel growth going ahead. Further, we expect the companys margin to improve from these levels on the back of easing commodity prices and closure of lower-margin E&P projects. Overall, we expect the company to post a top-line CAGR of 16.0% over FY201214E. We expect adjusted PAT to register a CAGR of 37.0% to `221cr over FY201214E. With the recent sharp correction, the stock is available at attractive valuation of just 8.8x FY2014 earnings, against its five-year historical average of 11x one-year forward earnings. We recommend Buy on the stock with a target price of `246, valuing the stock at 11x FY2014 earnings.

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 66.0 10.1 6.1 17.9

Abs.(%) Sensex Bajaj Electricals

3m (7.3) 9.2

1yr (10.0)

3yr 12.4

(19.6) 132.8

Key financials
Y/E March (` cr) Net Sales % chg Net Profit % chg EBITDA Margin (%) FDEPS (`) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x)
Source: Company, Angel Research

FY2011 2,741 23.1 130 16.5 8.7 14.7 13.4 3.2 26.2 33.1 0.7 8.5

FY2012 3,099 13.1 118 (9.2) 7.7 11.8 16.7 2.8 18.0 27.9 0.7 8.8

FY2013E 3,569 15.2 172 46.0 8.6 17.3 11.4 2.4 22.9 31.9 0.6 6.5

FY2014E 4,172 16.9 221 28.6 9.2 22.3 8.8 2.1 25.3 36.1 0.5 5.3

Sharan Lillaney
+91 22 3935 7800 Ext: 6811 Sharanb.lillaney@angeltrade.com

Please refer to important disclosures at the end of this report

Bajaj Electricals | 4QFY2012 Result Update

Exhibit 1: 4QFY2012 and FY2012 performance highlights

Y/E March (` cr) Net Sales Consumption of RM (% of Sales) Staff Costs (% of Sales) Other Expenses (% of Sales) Total Expenditure Operating Profit OPM Interest Depreciation Other Income PBT (excl. Extr. Items) Extr. Income/(Expense) PBT (incl. Extr. Items) (% of Sales) Provision for Taxation (% of PBT) Prior Period Items Adjusted PAT PATM Equity shares (cr) EPS (` ) Adjusted PAT
Source: Company, Angel Research

4QFY12 1,060 824.3 77.8 38.0 3.6 111.7 10.5 974.0 86.2 8.1 16.3 3.7 6.4 72.6 72.6 6.8 23.6 32.5 49.0 4.6 10.0 4.9 49.0

3QFY12 793.6 593.7 74.8 34.1 4.3 101.1 12.7 728.9 64.8 8.2 15.2 2.9 2.1 48.8 48.8 6.2 16.0 32.7 32.8 4.1 10.0 3.3 32.8

% chg (qoq) 33.6 38.8 11.3 10.5 33.6 33.1 (3)bp 7.4 26.7 200.5 48.8 48.8 47.9

4QFY11 980 764.5 78.0 32.4 3.3 81.0 8.3 877.9 101.7 10.4 6.5 3.4 2.3 94.1 (5.0) 89.1 9.1 30.6 34.3 1.1

% chg (yoy) 8.2 7.8 17.3 37.9 10.9 (15.3) (225)bp 150.2 7.0 180.7 (22.8) (18.5) (22.7)

FY2012 3,099 2,350.0 75.8 149.5 4.8 362.4 11.7 2,861.9 237.1 7.7 63.1 12.5 14.4 176.0 176.0 5.7 58.1 33.0 -

FY2011 2,741 2,094.7 76.4 122.4 4.5 285.6 10.4 2,502.8 238.0 8.7 29.1 10.8 5.7 203.9 203.9 7.4 74.0 36.3 (15.0) 144.9 5.3 9.8 14.8 159.8

% chg 13.1 12.2 22.1 26.9 14.3 (0.4) (765)bp 116.8 16.3 151.7 (13.7) (13.7) (21.5)

49.2 48bp 49.2 49.2

57.5 5.9 9.9 5.8 56.4

(14.7) (124)bp (15.4) (13.1)

117.9 3.8 9.8 12.1 117.9

(18.6) (380)bp (18.6) (26.3)

Segment-wise performance
For 4QFY2012, the lighting division posted growth of 23.1% yoy to `248cr. The segment reported higher EBIT of `26cr in 4QFY2012 compared to `18cr in 4QFY2011. EBIT margin of the segment increased by 140bp yoy to 10.4%. The consumer durables division maintained its strong growth momentum, with sales increasing by 10.4% yoy to `444cr. EBIT for the segment came in at `42cr, implying an EBIT margin of 9.5%, down 199bp yoy. The E&P segment posted a decline of 2.2% in sales to `368cr. EBIT margin of the segment declined by 497bp yoy during the quarter to 5.6%.

May 29, 2012

Bajaj Electricals | 4QFY2012 Result Update

Exhibit 2: Segment-wise performance

Y/E Mar (` cr) Total Revenue A) Lighting B) Cons Durables C) E&P D) Others Total Less: Inter-Segment Net Sales EBIT Margin (%) A) Lighting B) Cons Durables C) E&P D) Others 10.4 9.5 5.6 (25.0) 5.6 11.1 3.6 20.6 9.0 11.5 10.6 (60.0) 482bp (159)bp 196 bp (4,559) bp 140 bp (199) bp (497) bp 3,500 bp 247.9 444.3 367.8 0.2 1,060.2 1,060.2 200.2 413.8 179.3 0.3 793.6 793.6 201.3 402.3 376.0 0.2 979.9 979.9 33.6 8.2 23.8 7.4 105.1 (41.2) 33.6 23.1 10.4 (2.2) 8.2 4QFY12 3QFY12 4QFY11 % chg (qoq) % chg (yoy)

Source: Company, Angel Research

Sales growth moderates to 8.2%

The company has consistently posted strong growth in its sales over the past eight quarters. In 4QFY2012, the company reported moderate growth of 8.2% yoy. Growth was backed by strong performance by the consumer durables and lighting segments. Going ahead as well, we expect sales to continue to report a strong performance.

Exhibit 3: Sales trend

1,200 1,000 800
(` cr)

Sales (LHS) 980 690

yoy Growth (RHS)

1,060 794

35 30

701 544

25
(%)

600 400 200 0

588 484

20 15 10 5 0

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

Source: Company, Angel Research

May 29, 2012

4QFY12

Bajaj Electricals | 4QFY2012 Result Update

OPM remains under pressure, declines by 225bp yoy

BELs OPM declined by 225bp yoy during 4QFY2012 to 8.1%, while declining by mere 3bp qoq. EBIT margins of the E&P and consumer durable segments were under pressure during the quarter and reported a decline on a yoy basis.

Exhibit 4: OPM trend

120 100
(` cr)

EBITDA (LHS) 10.3 8.4 7.6 5.5 10.4

OPM (RHS)

12 8.2 8.1 10 8
(%)
(%)

80 60 40 20 0 41
1QFY11

7.5

6 4

45
2QFY11

71
3QFY11

102
4QFY11

30
1QFY12

53
2QFY12

65
3QFY12

86
4QFY12
49.0

2 0

Source: Company, Angel Research

PAT down by 14.7%

The companys PAT declined by 14.7% yoy to `49cr on the back of OPM compression in 4QFY2012. Despite a 225bp contraction in OPM, the companys PAT margin declined by 124bp yoy to 4.6%, owing to higher other income, which increased by 181% yoy to `6cr.

Exhibit 5: PAT trend

70 60 50 PAT (LHS) 57.5 40 32.8 23 23 11.1 25.0 PAT growth (RHS) 50 40 30 20 10 0 (10) (20) (30) (40) (50) (60)

(` cr)

40 30 20 10 0

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

Source: Company, Angel Research

May 29, 2012

4QFY12

Bajaj Electricals | 4QFY2012 Result Update

Investment arguments
Strong brand image Leveraging on strong brands and substantial market share: BEL has a strong brand positioning and a well-spread distribution network. As per the company's internal estimates, it is the fastest growing player in the domestic appliances market, which is growing at 20% per year. In the small appliances market, BEL enjoys a market share of over 15-30% across all product categories. Future growth drivers Rural markets, acquisitions and newer verticals: BEL plans to capitalize on growth in rural markets. The company has also identified 7-8 potential acquisition candidates across businesses. Management expects about 15% of future sales to come from the acquired businesses. The company also plans to foray into newer verticals, including water management, which is an underpenetrated and rapidly growing market.

Outlook and valuation

We believe consumer appliances and new product launches will fuel growth going ahead. Further, we expect the companys margin to improve from these levels on the back of easing commodity prices and closure of lower-margin E&P projects. Overall, we expect the company to post a top-line CAGR of 16.0% over FY2012 14E. We expect adjusted PAT to register a CAGR of 37.0% to `221cr over FY201214E. With the recent sharp correction, the stock is available at attractive valuation of just 8.8x FY2014 earnings, against its five-year historical average of 11x one-year forward earnings. We recommend Buy on the stock with a target price of `246, valuing the stock at 11x FY2014 earnings.

May 29, 2012

Bajaj Electricals | 4QFY2012 Result Update

Profit and loss statement

Y/E March (` cr) Total operating income % chg Total Expenditure Net Raw Materials Other Mfg costs Personnel Other EBITDA % chg (% of Net Sales) Depreciation& Amortisation EBIT % chg (% of Net Sales) Interest & other Charges Other Income (% of PBT) Share in profit of Associates Recurring PBT % chg Extraordinary Expense/(Inc.) PBT (reported) Tax (% of PBT) PAT (reported) Add: Share of earnings of associate Less: Minority interest (MI) Prior period items PAT after MI (reported) ADJ. PAT % chg (% of Net Sales) Basic EPS (`) Fully Diluted EPS (`) % chg FY10 2,227 26.1 1,994 1,652 113 97 131 233 28.0 10.5 9 224 29.1 10.0 37 8 4.3 195 37.3 195 75 38.6 120 8 120 112 22.4 5.0 12.0 11.7 13.5 FY11 2,741 23.1 2,503 2,095 126 122 160 238 2.2 8.7 11 227 1.6 8.3 29 6 2.8 204 4.5 (15) 219 74 33.8 145 145 130 16.5 4.7 14.7 14.7 25.2 FY12 3,099 13.1 2,862 2,350 167 149 195 237 (0.4) 7.7 13 225 (1.2) 7.2 63 14 8.2 176 (13.7) 176 58 33.0 118 118 118 (9.2) 3.8 11.8 11.8 (19.3) FY13E 3,569 15.2 3,262 2,695 164 178 225 307 29.5 8.6 17 290 29.2 8.1 48 14 5.6 257 45.9 257 85 33.0 172 172 172 46.0 4.8 17.3 17.3 46.2 FY14E 4,172 16.9 3,788 3,129 192 209 259 384 25.0 9.2 19 365 25.8 8.7 48 14 4.3 332 29.1 1 331 109 33.1 221 221 221 28.6 5.3 22.3 22.3 29.1

May 29, 2012

Bajaj Electricals | 4QFY2012 Result Update

Balance sheet
Y/E March SOURCES OF FUNDS Equity Share Capital Preference Capital Reserves& Surplus Shareholders Funds Minority Interest Total Loans Deferred Tax Liability (Net) Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc. Depreciation Net Block Capital Work-in-Progress Goodwill Investments Current Assets Cash Loans & Advances Inventories Debtors Other Current liabilities Net Current Assets Mis. Exp. not written off Total Assets 170 68 102 0 37 1,199 61 178 209 751 692 507 646 230 77 153 37 1,575 48 167 295 1,065 1,039 536 726 265 89 175 12 44 1,719 54 201 355 1,108 1,065 654 885 305 106 199 3 44 1,898 103 268 324 1,202 1,202 696 942 342 125 217 3 44 2,180 83 313 379 1,405 1,350 830 1,095 20 0.2 475 494 152 (1) 646 20 591 611 116 (2) 726 20 680 700 187 (2) 885 20 782 802 142 (2) 942 20 935 955 142 (2) 1,095 FY10 FY11 FY12 FY13E FY14E

May 29, 2012

Bajaj Electricals | 4QFY2012 Result Update

Cash flow statement

Y/E March Profit before tax Depreciation (Inc.)/ Dec. in Working Capital Less: Other income Direct taxes paid Cash Flow from Operations (Inc.)/ Dec. in Fixed Assets (Inc.)/ Dec. in Investments (Inc.)/ Dec. in loans and advances Other income Cash Flow from Investing Issue of Equity Inc./(Dec.) in loans Dividend Paid (Incl. Tax) Others Cash Flow from Financing Inc./(Dec.) in Cash Opening Cash balances Closing Cash balances FY10 201 9 (192) 8 75 (66) (13) (5) 8 (10) 163 (62) 27 9.4 83 7 54 61 FY11 219 11 (64) 6 74 86 (60) (0) 6 (54) 0 (35) 42 32.2 (45) (13) 61 48 FY12 176 13 (148) 14 58 (32) (46) (7) 14 (39) 0 71 65 70.8 76 6 48 54 FY13E 257 17 1 14 85 176 (32) 14 (17) (45) 70 6.3 (109) 50 54 103 FY14E 332 19 (157) 14 109 69 (37) 14 (23) 70 3.0 (67) (20) 103 83

May 29, 2012

Bajaj Electricals | 4QFY2012 Result Update

Key ratios
Y/E March Valuation Ratio (x) P/E (on FDEPS) P/E (on basic, reported EPS) P/CEPS P/BV Dividend yield (%) Market cap. / Sales EV/Sales EV/EBITDA EV / Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value DuPont Analysis (%) EBIT margin Tax retention ratio Asset turnover (x) ROCE (Post Tax) Cost of Debt (Post Tax) Leverage (x) Operating ROE Returns (%) ROCE (Pre-tax) Angel ROIC ROE Turnover ratios (x) Asset Turnover (Gross Block) Asset Turnover (Net Block) Operating Income / Invested Capital Inventory / Sales (days) Receivables (days) Payables (days) Working capital cycle (ex-cash) (days) Solvency ratios (x) Gross debt to equity Net debt to equity Net debt to EBITDA Interest Coverage (EBIT / Interest) 0.3 0.2 0.4 6.0 0.2 0.1 0.3 7.8 0.3 0.2 0.6 3.6 0.2 0.1 0.1 6.1 0.1 0.1 0.2 7.6 13.7 22.7 4.0 32 107 115 59 13.7 21.5 4.0 34 121 126 62 12.5 18.9 3.8 38 128 134 64 12.5 19.1 3.9 35 118 127 61 12.9 20.1 4.1 31 114 123 59 40.4 36.7 31.7 33.1 27.2 26.2 27.9 15.8 18.0 31.9 22.9 22.9 36.1 29.0 25.3 10.1 81.3 4.5 36.9 12.7 0.3 43.0 8.3 75.4 4.3 27.2 14.3 0.1 28.8 7.2 52.7 4.1 15.7 27.8 0.1 13.9 8.1 65.3 4.3 22.7 19.5 0.1 23.0 8.7 73.1 4.5 28.9 22.6 0.1 29.2 12.0 11.7 15.2 2.4 50.7 14.7 14.7 12.5 3.6 61.8 11.8 11.8 15.1 5.6 70.2 17.3 17.3 10.4 6.0 80.5 22.3 22.3 8.1 6.0 95.9 16.8 16.4 15.2 3.9 1.2 0.9 0.9 8.6 3.1 13.4 13.4 12.5 3.2 1.8 0.7 0.7 8.5 2.8 16.7 16.7 15.1 2.8 2.8 0.6 0.7 8.8 2.4 11.4 11.4 10.4 2.4 3.0 0.5 0.6 6.5 2.1 8.8 8.8 8.1 2.1 3.0 0.5 0.5 5.3 1.9 FY10 FY11 FY12 FY13E FY14E

May 29, 2012

Bajaj Electricals | 4QFY2012 Result Update

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

DISCLAIMER
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.

Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

Bajaj Electricals No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

Ratings (Returns):

Buy (> 15%) Reduce (-5% to 15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

May 29, 2012

10