>BAJAJ ELECTRICALS: Result Update First quarter FY 2011

Bajaj Electricals (BEL) posted a healthy 35.2% growth in net sales for 1QFY2011, mainly on the back of strong growth in the lighting and consumer durables divisions, which grew 52.5% and 43.9%, respectively. Net sales at Rs483.9cr (Rs358.0cr) were slightly above our expectations. However, OPM declined to 8.4% (10.0%) on higher raw material costs. Interest costs fell to Rs5.7cr (Rs8.6cr) in 1QFY2011. Overall, PAT increased 37.3% to Rs22.5cr (Rs16.4cr). The carry
forward order book in the E&P division currently stands at Rs810cr. We remain Neutral on the stock.

■ Top-line growth momentum continues: The company maintained strong growth across segments during 1QFY2011. The lighting business grew 33%, while the luminaires business grew 78% during the quarter. In consumer durables, the appliances business grew 40%, Morphy Richards grew 48%, while fans registered 46% yoy growth. The E&P business registered mere 8% yoy growth for the quarter on a high base (82% growth in 1QFY2010).

■ Outlook and Valuations: We maintain our positive outlook on the company on the back of a comfortable order book position in the E&P business and normal monsoons expected this year, which augurs well for the consumer durables business. We expect sales to register 20.6% CAGR to Rs3,241cr in FY2012E from Rs2,229cr in FY2010. Currently, the stock is trading at fair valuations of 14.7x and 11.9x FY2011E and FY2012E EPS, respectively. We maintain a Neutral on the stock.

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