Shares of Bajaj Electricals slumped 4 per cent on Wednesday after the company came out with lower-than-expected Q4 performance. However, analysts remain bullish on the stock, as Bajaj Electricals is expected to report better numbers on rural demand picking up due to a good monsoon.
Bajaj Electricals Q4 net profit dipped 29 per cent to ₹39 crore as against ₹54 crore reported year-ago same period. Net sales grew marginally 6 per cent at ₹1,334 crore (₹1,258 crore).
After hitting a low of ₹946.45 during intra-day on the BSE, the stock closed at ₹957.65, down 4.03 per cent against the previous day's close of ₹997.85.
‘Demerger is positive’
Analysts also see re-rating of Bajaj Electricals once it demerges its EPC business.
“Consistent improvement in balance sheet with strong cash generation ability makes us confident of the company’s ability to overcome challenging environment,” said YES Securities. . “We continue with our positive stance on the company and maintain Buy. Further, demerger should lead to a sustained focus on consumer products business, which can lead to outperformance driving a re‐rating,” it added.
JM Financial said, “Notwithstanding the Q4-FY22 weakness, we continue to like BEL given that it demonstrated turnaround in the EPC business (cash flow generation; containment of revenue growth; EBIT positive in 4QFY22); margin improvement and strong cash flow generation in the CP business as it continues to invest in product rejuvenation (category presence, premium mix, etc.) as well as brand-building activities; and demerger of its EPC business (BEL will be a pure consumer appliances play).”
New product launches
Due to steep inflation in input prices and no price hikes in Q4, gross margins declined 309 bps y-o-y, said ICICI Securities, adding, “We note the company took one round of price hikes in April 2022. It needs additional price hikes to improve profitability. New product launches and efforts to drive premiumisation will likely result in higher realisations.”