Target: ₹1,200
CMP: ₹1,063.45
We initiate coverage on Bajaj Electricals with a Buy rating and target price of ₹1,200. We believe BJE is a play on the growth opportunity in FMEG and anticipated rural recovery, given its diverse product offerings along with a leadership position within key categories in home and kitchen appliances; its well-entrenched distribution network; and its higher rural saliency vs peers (c.2x of peers).
After turning net cash (after four decades) and simplifying its corporate structure under Phase 1 of its transformation journey, in its next phase, BJE is focused on industry-leading growth and aims to achieve it through refreshing the product portfolio; offering products across the consumer value chain via a multi-brand strategy; and stepping up investments in branding and innovation.
We expect BJE’s revenue/EBITDA/PAT to grow at a CAGR of 14/38/47 per cent over FY24-27. At CMP, BJE trades at 28x FY27 EPS (10-40 per cent discount to peers). Notwithstanding the near-term softness in demand (barring summer portfolio), we believe BJE is well-placed to gain from the much-anticipated improvement in demand (especially from H2FY25) along with margin expansion, led by presence across small ticket daily use products and cost efficiency measures along with higher operating leverage.