>BAJAJ ELECTRICALS LTD (BAEL)

 In Q4FY12, consolidated revenues stood at Rs 10.6 bn driven by consumer durable and E&P business.


 On Consolidated basis, operating margins for the quarter stood at 8.1% vis-à-vis 9.9% in Q4FY11. Being a net importer, company has been observing margin pressure in the lighting and partly in fans business due to depreciating rupee trend.


 We highlight that the company's imports comprises of 15-20% in fans and appliances business and 35-40% in Morphy Richards. Lately, company has been trying to minimize its exposure to the overseas saucing and produce major products domestically.



 Management has indicated that with the current INR trend and considering various overheads such as forwarding charges etc, sourcing from India is becoming more viable than importing from countries like China etc in majority of product categories.


 In 2HFY12, company has received some relief from drop in input prices, mainly aluminum and copper. Management has been trying to maintain margins by employing steady cost management across the board and maximizing contribution from new products.


 Consumer appliances division revenues stood to Rs 4.4 bn vis-à-vis Rs 4 bn in Q4FY11. Sales in the consumer division got negatively impacted by significant drop in fans and 'Cooler' sales this year on account of lighter summer in major parts of the country.


 Fans and Cooler sales has dropped over 50% YoY in Q4FY12 resulting in significant inventory build-up for each of the two product categories. While, company has started to observe some demand pick up in Q1FY13, the channel inventory might require two to three quarters to get cleared.


 Ex-Fans and Coolers, Consumer division has grown by over 30% YoY in the quarter and new product launches like 'Induction cooker' has reported over 40% YoY growth in Q4FY12. Management plans to introduce new products through the existing dealer network and through 'Bajaj World', company's exclusive retail outlets that currently includes 10 stores across various cities in India. Lighting division reported 23% YoY growth in revenues at Rs 2.4 bn in the quarter. 


 We believe that the Indian consumer space has been undergoing a change in terms of consumer preference toward the branded products manufactured by the company and peer group (Havells, Crompton Greaves etc) over the unorganized sector.


 Current order book in E&P segment stands at Rs 6.1 bn that includes Rs 1.3 bn in high mast and Rs 3.0 bn in special project. The segment has been observing pressure due sluggish public spending in infrastructure projects and building up of overcapacity in the T&D space.


 In the quarter under review, E&P segment has reported the operating profit of Rs 205 mn vis-à-vis Rs 397 mn in Q4FY11 and Rs 65 mn in Q3FY12.