Bajaj Electricals Ltd- Initiating Coverage Reportbreport.myiris.com/KCR1/BAJELECT_20111229.pdf ·...

Bajaj Electricals Ltd- Initiating Coverage Report BUY

Date: 29th December, 2011

Sector: Engineering &Capital Goods

CMP `140.0Target Price: `208.0 Upside Potential: 48.6%

Bajaj Electricals Ltd (BJE) is a 72 year old company with diversified business interest inconsumer durables, lighting and engineering & projects (E&P) which has been growingstrongly at a CAGR of 25.9% between FY08-FY11 and is expected to grow at the CAGR of17.5% between FY11-FY13E backed by robust growth in consumer durable segment andsteady growth in other divisions.

Consumer Durables BU rising high on increasing Indian consumption: ConsumerBSE Code 500031NSE Code BAJAJELECBloomberg BJE@IN Reuters BJEL.BOMkt cap (Rs. bn) 13.94Equity shares(mn) 98.8 Face Value(`) 252Weeks H/L 296.0/132.9 Sensex 15727 9

g g g pdurables segment (small appliances & fans business units) has grown exponentially with theCAGR of 28.4% between FY08-FY11 and is expected to grow at the CAGR of 22%% betweenFY11-FY13E backed by company's aggressive promotion strategies, extensive dealer network,strong brand franchise, introduction of newer products. The business unit (BU) contributes~46.6% to total revenue of BJE and the contribution is expected to go to 50.3% by FY13E.Around 35% of total sales in consumer segment come from rural and semi-urban areas whichare growing at approximately three times the growth in urban markets.

Sensex 15727.9Nifty 4705.8

Shareholding as on 30th September 2011 (%)Promoters 65.6Mutual Funds/UTI 9.2 FIs/ Banks 1.0FIIs 6 5

Lighting and luminaries BU on steady growth backed by increasing CFL demand:The Lighting BU has achieved a turnover of `3160 mn in FY11 with robust CAGR growth of~24% between FY07-FY11 and is expected to grow at the CAGR of ~21.7% in FY11-FY13Edespite intense competition and rapidly changing market dynamics. The CFL segmentcontinues to register a strong growth with sales exceeded the `1750 mn mark in FY11 and isexpected to grow at the CAGR of 23.5% in FY11- FY13E. The luminaire BU maintains No. 2position in India with ~17% market share in organized sector.

FIIs 6.5Bodies Corporate 3.7Public 13.0Any Others: 1.1

Re-structuring of E&P projects BU to improve ROCE & Operating Margin: The E&Pproject BU contributed ~30% to BJE’s total revenue but the contribution is expected to declineto ~25% of total revenue by FY13E and is expected to grow at the CAGR of 9.7% betweenFY11-FY13E. BJE is planning to close down critical projects to reduce excess capital employedand improve the segment performance.

Changing Product mix to achieve better margins in long run: The share of consumer

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ands

BJESENSEX (,000) [R.H.S.]

g g g gdurable segment to total has increased to 46.6% in FY11 and is expected to go up to 50.3%by FY13E, considering BJE’s strategy to re-align business model toward fastest growingconsumer durable segment. With the increasing share of higher margin consumer durablesegment in the total sales along with favorable products mix in lighting (higher sales of CFLs),we expect BJE’s EBITDA margins to improve to 9.0% by FY13E.

Valuation & Recommendation:At CMP of `140/ share BJE is currently trading at P/E Multiple of 9 1x on FY12E EPS of `15 4

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Revenue EBITDA EBITDA Margins PAT Net Margins (%) EPS P/E EV/EBITDA ROE(` mn) (` mn) (%) (` mn)

At CMP of `140/ share, BJE is currently trading at P/E Multiple of 9.1x on FY12E EPS of `15.4and at 7.4x on FY13E EPS of `18.9. We recommend “BUY” on BJE with target price of`208/ share (11x P/E on FY13 EPS of `18.9), which is strongly supported by BJE’s renownedbrand, collaboration with strong foreign players and wide distribution providing an competitiveadvantage to BJE and will help BJE to improve its margins in coming years. BJE is a dominantplayer in Appliances, luminaire & lot of product categories in fans division.

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Analyst: Amit Anwani – [email protected] +91-22-30287987

KC Research Reports are also available on Reuters, Thomson publishers, myiris.com, Bloomberg KCSL <GO> and Factset

g ( ) / /( ) ( ) ( ) ( )FY10 22286.3 2363.6 10.6% 1252.7 5.6% 12.8 17.4 9.6 25.3%FY11 27407.5 2522.7 9.2% 1448.6 5.3% 14.7 16.7 9.9 23.7%FY12E 31508.0 2728.8 8.7% 1521.4 4.8% 15.4 9.1 5.6 20.7%FY13E 37808.2 3395.2 9.0% 1873.1 5.0% 18.9 7.4 4.3 20.9%

Bajaj Electricals Ltd- Initiating Coverage Report

Investment Rationale:

Consumer Durables to provide future growth potential backed by rising Indian consumption:

Consumer segment which consists of small appliances & fans business units (BUs) has grownexponentially with the CAGR of 28.4% between FY08-FY11 with segment revenue at `12768mn in FY11 and is expected to grow at the CAGR of 22% between FY11-FY13E backed by

Consumer Durables, fastest growing segment with CAGR of 28.4% between FY08-FY11 & i t d t t mn in FY11 and is expected to grow at the CAGR of 22% between FY11 FY13E backed by

company's aggressive promotion strategies, extensive dealer network, strong brandfranchise, introduction of newer products and improvement in existing products. Consumerdurable business unit (BU) contributes ~46.6% to total revenue of Bajaj Electricals Ltd (BJE)and the contribution is expected to go to 50.3% by FY13E. Around 35% of total sales inconsumer segment come from rural and semi-urban areas which are growing atapproximately three times the growth in urban markets.

is expected to grow at the CAGR of 22% in FY11-FY13E

6031.67532.7

9544.5

12768.6

15450.1

19011.3

10.4%9.3%

13.0%

11.3%

11.0%11.2%

4%

6%

8%

10%

12%

14%

5000

10000

15000

20000

A) Small Appliances BU:

Appliances BU has a wide range of domestic appliances including water heaters mixers food

0%

2%

0

FY08 FY09 FY10 FY11 FY12E FY13EConsumer Durables BU Revenue (Rs. Mn) Consumer Durables EBITDA Margin (%)

Morphy Richards Appliances BU has a wide range of domestic appliances including water heaters, mixers, foodprocessors, microwave ovens, air coolers, steam and dry irons, electric kettles, waterfilters, toasters, rice cookers, (OTG) oven-toaster-grillers, juicer-mixer-grinders, hairdryers, chimneys, gas stoves, hobs, room heaters, home ups, pressure cookers, waterpurifier etc. Bajaj electrical being the fastest growing Appliances company in the country ishaving leadership position in various category including Irons, Water Heaters, OTG, Mixersand Coolers etc. with market share ranging between 15-30% across the categories.

Morphy Richards Brand is fastest growing in ‘Domestic small Appliance’ category & occupies no.1position in India for coffee-makers,toasters,

The launch of vide range of Pressure Cookers and Water Purifiers during the year in fewmarkets has received good response with ~23% contribution to appliance BU sales in FY11.BJE is having a tie-ups with UK based Morphy Richards (MR), and BJE is also having tie-upwith Italy based Nardi for gas appliances, cooking etc.The MR brand has emerged as a fastest growing and leading brand in the premium segmentof “Small Domestic Appliances” industry and being the first brand in small appliances segmentto cross the `1000 mn milestone, has strong presence in modern format retail, CSD, and in

Source: Company, ACE Equity, KC Research

, g p , ,Premium trade outlets. The Morphy Richard revenue has grown at the CAGR of 35% betweenFY09-FY11 and is expected to grow at the CAGR of 25% between FY11-FY13E, in spite ofintense competition from international premium brands.


In the coming years, Morphy Richard growth will be supported by introducing new models inmixers, water heater and iron, expending dealer network for deeper rural penetration andfocusing on modern retail formats and setting up showrooms in major cities across India tohave more visibility. The small appliances BU (other than Morphy Richards) has grown at theCAGR of ~31% between FY07-FY11 and is estimated to grow at ~22.1% between FY11-FY13E.

B) Fans BU:

The Fans BU has a wide and attractive range of ceiling, portable, fresh air & industrial aircirculators and exhaust fans, in various sizes and colors and also has taken new initiatives byentering into water lifting pumps and power generators market.The company is having tie-ups with Midea (China) the world’s largest company for TPW fansand with Walt Disney for children fans under which BJE has already launched new models with

Bajaj fans have unchallenged leadership in 12 major states in the country and a dominant player in 6 states backed by strong relationships

and with Walt Disney for children fans under which BJE has already launched new models withBajaj-Disney Brand. During the year, the company introduced many new models of air-circulators and a wide range of industrial exhaust fans, pumps & motors and power generators.Bajaj fans are sold in almost 55000 outlets across the country, of which around 18% are inrural areas and small towns with population less than 50000 with its aggressive marketing andpromotional strategy. Bajaj fans have unchallenged leadership in 12 major states in thecountry and a dominant player in 6 states backed by strong relationships with its vendors

with its vendors located across the states in India.,

located across the states in India.The fan industry is dominated by organized sector with market share of ~65% with majorplayers like CG, Usha and Orient . BJE’s fan BU is among top three players in fans with amarket share of ~16.5% in organized sector. The fan BU has grown at the CAGR of ~29%between FY07-FY11 and we expect the segment to grow at the CAGR of ~21.3% betweenFY11-FY13E backed by the revival in construction sector industry, replacement markets andshifting of sales from unorganized segment to organized segment.g g g g gChakan Unit of BJE produced over 0.428 mn fans/ annum and did innovative work on new

product development, value engineering initiatives, quality improvement efforts.

1300

1625.1

61.0% 60.6% 59.9% 60.3% 60.4%

50%

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70%

10000

12000

14000

39.0% 39.4% 40.1% 39.7% 39.6%

36.1%

30%

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45%

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6000

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8000

4022.75054.5 6612.7

8011.0

9853.6

570

7301040

1300

25.9%

32.3%

21.7% 23.3%

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FY09 FY10 FY11 FY12E FY13E

2940 3760 5115.9 6139.1 7532.7

27.9%

20.0%22.7%

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FY09 FY10 FY11 FY12E FY13EMorphy Richards Rev. (Rs. Mn.)Small Appliances Rev. (Rs. Mn)Appliances Rev. Growth (%)Appliances as % of Consumer durables Rev. (%)

FY09 FY10 FY11 FY12E FY13EFans BU Rev. (Rs. Mn.)Fans BU As % of Consumer Durables Rev. (%)Fans BU Rev. Growth (%)


Lighting and luminaries to maintain steady growth backed by increasing CFL demand:

The Lighting BU markets a wide range of light sources and domestic luminaires. The lightsources include General Lighting Service (GLS) lamps, Fluorescent Tube Lights(FTL), Compact Fluorescent Lamps (CFL) and special purpose lamps. The BU has made amajor foray into LED based products through introduction of LED portable lights to lay special

CFL segment on strong growth footing with expected CAGR of ~23.5% between FY11-FY13E with improving retail presence & superior distribution emphasis on the green, environment friendly technologies and products. The manufacturing

of GLS and FTL lamps is undertaken at Hind lamps, an associate of BJE, located in U.P. Theequity investment in Starlite Lighting for CFL has added to its marketing strength.The Lighting BU is doing well despite intense competition and rapidly changing marketdynamics. It has achieved a turnover of `3160 mn in FY11 with robust CAGR growth of~24% between FY07-FY11 and is expected to grow at the CAGR of ~21.7% in FY11-FY13E.The CFL segment continues to register a strong growth due to greater adoption of energy

superior distribution structure

g g g g g p gysaving lamps by individuals and the government bodies. The CFL sales, as a productsegment, have exceeded the `1750 mn mark in FY11 and is expected to grow at the CAGR of23.5% between FY11- FY13E. The BU has bagged prestigious orders from both governmentundertakings and private Bodies in FY11 in the CFL category.The BU has continued to improve its retail presence by expanding its network and reaching toover 400000 outlets with its superior distributor structure to increase the reach in Tier III &Tier IV towns The Lighting BU with its improved distribution network wide product

The luminaries' BU maintain No. 2 position in industry with ~17% Tier IV towns. The Lighting BU with its improved distribution network, wide product

range, and efficient sourcing strategies is poised for improved growth in the future. The CFLwould act as a growth driver with reduced price and energy conservation drive.The Luminaires BU markets a comprehensive range of luminaires (light fittings)covering, commercial, industrial, flood lighting, street lighting, post-top lighting and a widevariety of light sources ranging from CFL, FTL to HID lamps of various types.The BU maintains clear No. 2 position in Luminaire industry in India with ~17% market share

in industry with 17% market share in organized sector in India is expected to grow at 14.1% CAGR in FY11-FY13E

in organized sector, next only to Philips (~22%). The major customers of the business unitinclude corporate like Tata Group, Reliance group, L&T, Aditya Birla Group, Siemens, AirportAuthority of India, Container Corporation of India, State Electricity Boards, NTPC, MSRDC etc.

25.2% 25.9%

34.6%39.0%

34.8%

25%30%35%40%45%

6000700080009000

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25.2%21.1% 17.7%

‐1.8%

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0100020003000400050006000


Luminaires (Rs. Mn)

16.7%

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28.0% 27.7%

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CFL R (R M )


Lighting BU Rev. (Rs Mn.)Lighting BU Rev. Growth (%)Luminaires BU Rev. Growth (%)Segment Rev Growth (%)

CFL Rev. (Rs. Mn.)

CFL Rev. Growth (%)

CFL as % of Lighting & Luminaires BU (%)


Restructuring of E&P projects BU to improve return on capital employed & Operating Margin :

The E&P project BU contributed ~30.3% to BJE’s total revenue in FY11 but the contributionis expected to decline to ~26.4% of total revenue by FY13E. The E&P projects BU has grownat the CAGR of 28.5% between FY07-FY11 and is expected to grow at the CAGR of 9.7%between FY11-FY13E . For the first time, Special Project Division & TLT Division has crossed

The E&P project BU contribution is expected to decline to ~26.4% of total revenue by FY13E and is expected to grow at the CAGR of 9.7% b t FY11 FY13E the `3000 mn marks each during FY11.

Despite intense competition from the new players in the highmast and street lighting domainduring FY11, E&P BU has been able to sell nearly 4200 highmasts and over 45000 streetlighting poles and 19004 metric tones of transmission line towers and achieved nearly30,000 tons of galvanizing in FY11. The E&P project order book as on July 2011 stood at`7337 mn which is mainly skewed toward transmission line tower and special projects. BJE’smanufacturing facility for E&P project BU is located at Ranjangaon.

between FY11-FY13E. BJE is planning to close down critical projects to reduce excess capital employed and to improve margins.

g y p j j gThe BU has executed several landmark projects during the year and has received manyprestigious orders including; i) Successful illumination of Wankhede Stadium at Mumbai forCricket World Cup 2011 ii) Order received from East North Interconnecting Co. Ltd. (ENICL)for 400 KV D/C (Quad) Biharsharif Purnia Line to cover a distance of 272 kms iii) Orderreceived from HRBC, Kolkata for special effect lighting for Vidyasagar Setu Bridge, Kolkata.BJE continued its foray into the Rural Electrification business which gave a sales turnover of`2360 mn and it is also making efforts to move into Restructured Accelerated Power`2360 mn and it is also making efforts to move into Restructured–Accelerated PowerDevelopment Reform Program (R-APDRP) scheme and sub-station arena.The overall margins for E&P project BU in FY11 were depressed, because of abnormalincrease in raw materials prices and extra efforts for time bound completion of prestigiousProjects under time constraints and adverse weather conditions. The return on capitalemployed from E&P projects has been dismal so far, hence BJE is planning to close downcritical projects to reduce excess capital employed and improve the segment performance.

7,3688,314 8,500

10,00044.0%

41.1%

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8000

10000

12000

38.3% 26.5% 40.0% 27.1% 28.5%12.6%

10.7%

8.8%

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14%

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100%

E&P project‐ segment wise revenue contribution (%) & E&P EBITDA Margin Trend

E&P project BU Revenue (Rs. Mn) and Revenue Growth (%)

5,224

12.8%

2.2%

17.6%

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31.6% 36.9% 36.0% 35.3% 36.0%

30.2% 36.6%24.0% 37.6% 35.5%

7.0%7.5%

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Engineering & Projects BU Revenue (Rs. Mn)

E&P Project Rev. Growth(%)

3) Highmast2) Special Projects1) TLT

Engineering & Projects EBITDA Margin (%) (R.H.S.)


Changing Product mix to achieve better margins in long run:

BJE's business is a good mix of products in consumer sector (consumer durables & lighting)and infrastructure sector thereby providing healthy diversification. Among the 3segments, consumer durable is the fastest growing segment with EBIDTA margins at 10-11% which is higher than 6-6.5% for lighting & 8-10% for E&P projects.

BJE’s strategy to re-align business model toward fastest growing, high margin consumer durable segment along with favorable products The share of consumer durable BU to total revenues has increased from 43.9% in FY08 to

46.6% in FY11 and is expected to go up to 50.3% by FY13E, considering BJE’s strategy tore-align business model toward fastest growing consumer durable segment. With theincreasing share of higher margin consumer durable BU in the total sales along withfavorable products mix in lighting (higher sales of CFLs), BJE’s margins are expected toimprove in next two years. We expect EBIDTA margins to improve to 9.0% in FY13E.

favorable products mix in lighting (higher sales of CFLs), we expect BJE’s EBITDA margins to improve to 9.0% by FY13E.

43.9% 42 7% % 46 6% 49 0% 50 3%

26.4% 29.6% 33.1% 30.3% 27.0% 26.4%

60%

80%

100%

Bajaj Electricals Ltd ‐ Revenue Mix

29.6% 27.7% 24.0% 23.0% 23.9% 23.2%

42.7% 42.8% 46.6% 49.0% 50.3%

0%

20%

40%

FY08 FY09 FY10 FY11 FY12E FY13ELighting Consumer Durables BU Engineering & Projects Others

33.3% 37.6% 33.4% 29.3% 21.6% 22.0%

60%

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100%

Bajaj Electricals Ltd ‐ Segment‐wise EBITDA Margin contribution

27.2%

45.6%44.7%

27.1%30.0%

33.0%30.0%

40.0%

50.0%Segment‐wise EBITDA Margin Trend

21.7% 22.0% 14.1% 12.9% 16.2% 15.4%

44.7% 39.9% 52.2% 57.6%62.0% 62.4%

0%

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40%

60%

FY08 FY09 FY10 FY11 FY12E FY13E

10.4% 9.3%

13.0%11.3% 11.0% 11.2%12.9% 12.6%

10.7% 8.8% 7.0% 7.5%

0.0%

10.0%

20.0%

FY08 FY09 FY10 FY11 FY12E FY13ELighting EBITDA Margin (%)C D bl EBITDA M i (%)


Lighting Consumer Durables

Engineering & Projects Others

Consumer Durables EBITDA Margin (%)Engineering & Projects EBITDA Margin (%)Others


Strengthening dealer Network, Mfg. & outsourcing arrangement to serve the customer better:

BJE has a strong distribution network with over 1000 distributors, 3000 authorizeddealers, more than 400000 retail outlets and 270 plus customer care centers across India.This ensures wider penetration and better after sales services to the consumers and henceprovides it an edge over Chinese and other players.p g p yBJE focuses mostly on design, quality control, branding and distribution. Most of themanufacturing is outsourced to third party vendors, who manufacture products according tothe specifications and designs provided by the company. BJE has over 200 vendors (ofwhich ~70% are dedicated vendors) from where they outsource their manufacturing jobs.In Appliance BU, BJE sources its requirement from dedicated vendors situated atNoida, Delhi, Himachal and imports from China. Under Morphy Richards brand, BJE sourcesabout 50% of its products through Indian vendors, while the rest is sourced from Chinesep g ,and other foreign vendors. In Fans, BJE sells outsources more than 95% of manufacturing tovendors while remaining 5% from its plant in Chakan with manufacturing capacity of 0.8 mnunits/annum. The company purchases more than 4 mn units from Midea, China, a strategicmove to thwart Chinese competition.In Lighting, it outsources 40% with the rest manufactured at its associate groupcompany, Hind Lamp in UP (GLS & FTL lamps); and Starlite Lighting at Nasik (CFLs). In E&PBU, BJE fabricates high-masts and towers at their manufacturing plant at Ranjangaon., g g p j g

Key risks & concerns:

Fluctuation in commodity prices: The Key raw materials for BJE includes copper and

aluminum any major fluctuation in these commodities may hurt the margins.

Increasing Competition: Due to high growth potential of segments in which BJE

operates, there has been increasing competition to gain market share. The key competitorsfor BJE includes Havells, Crompton Greaves, Usha, Orient and foreign players mainly fromchina. Any strategic move by competitors could impact the sales of the company. Thepricing across company’s business is also under risk due to competition.

Global & domestic economic environment: The global economic environment includingGlobal & domestic economic environment: The global economic environment including

debt crisis in certain European countries may hurt BJE’s business. Due to domestic economicslowdown the players in consumer durable industry will need to engage more in diversifyingtheir business model and extending its reach by offering good value proposition. In E&Psegment, slowdown in economy could pose a risk of delay in order inflows.

Currency fluctuation related Risk: The weakening of the Indian Rupee has impacted BJE’s


y g p p

imports as well as raw material cost. The Company had undertaken some foreign exchangeforward and option contracts to hedge the risks against the currency fluctuations.


Valuation & Recommendations:

We believe that BJE’s consumer and Lighting segment are showing growth potential infuture years though the poor E&P performance in the H1FY12 was disappointing because ofabnormal increase in raw materials prices and extra efforts for time bound completion of oldprojects by the company, which is resulting into the cost overrun for E&P segment. The

We recommend “BUY” on BJE with target price of `208/ share (11x P/E on FY13 EPS of `18.9), which is strongly supported by BJE’s renowned company has guided to reduce the capital employed in E&P projects for better cash flow

visibility and to improve margins in coming year. The concern of margins in consumerdurables BU is also easing off with some price increases taken by the company and declinein the commodity prices in FY11.BJE is expected to report total revenue and net profit CAGR of 17.5% and 13.7%respectively between FY11-FY13E backed by strong growth in consumer durables & lightingand revival of E&P projects segment.

renowned brand, collaboration with strong foreign players and wide distribution providing an competitive advantage to BJE.

p j gAt CMP of `140/ share, BJE is currently trading at P/E Multiple of 9.1x on FY12E EPS of `15.4and at 7.4x on FY13E EPS of `18.9. We recommend “BUY” on BJE with target price of`208/ share (11x P/E on FY13 EPS of `18.9), which is strongly supported by BJE’srenowned brand, collaboration with strong foreign players and wide distribution providing ancompetitive advantage to BJE and will help BJE to improve its margins in coming years. BJEis a dominant player in Appliances, luminaire & lot of product categories in fans division.

Peer Comparison :

ParticularsNet Sales (Rs. Mn)

EBITDA (Rs. Mn)

EBITDA Margin (%)

PAT(Rs Mn)

PAT Margin (%) EPS (Rs.) ROE (%) P/E (x) P/BV (x)

FY12E FY13E FY12E FY13E FY12E FY13E FY12E FY13E FY12E FY13E FY12E FY13E FY12E FY13EFY12E FY13E FY12E FY13E

Bajaj Electricals Ltd 31780 38136 2729 3395 8.7 9.0 1521 1873 4.8 5.0 15.4 18.9 20.7 20.9 9.0 7.3 1.9 1.5

*Havells India Ltd 64131 71408 6473 7436 10.1 10.4 3603 4349 6.0 6.0 28.8 34.9 43.3 37.5 13.6 11.3 5.9 4.2

*Crompton Greaves 109349 121489 10142 12667 9.3 10.4 5948 7586 5.0 6.0 9.3 11.8 16.8 18.6 13.2 10.4 2.2 1.9

Peer Comparison :

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EV

Bajaj Electricals Ltd- EV/EBITDA Band

*TTK Prestige Ltd 10961 14318 1754 2301 16.0 16.1 1175 1538 11.0 11.0 103.8 135.8 49.0 42.7 24.2 18.5 11.8 7.9

Bajaj Electricals Ltd- P/E Band

* Bloomberg estimates

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Company Background:

BJE is primarily a trading company where manufacturing of more than 90% of the productssold by the company are outsourced. BJE has diversified business interest and operatesthrough three main segments which includes; Consumer Durables (Small Appliance, MorphyRichard and Fans), Lighting (lighting, CFL and luminaries) and E&P projects.

Consumer Durables:Consumer durables segment is divided into appliances and fans. Appliance BU deals in a widerange of electric appliances including water heaters, mixers, microwave ovens, electricirons, toasters, rice cookers, oven-toaster-grillers, juicer-mixer-grinders, pressurecookers, water purifier etc. Fans BU has a wide range of ceiling, portable, fresh air &industrial air circulators and exhaust fans which are outsourced as well as manufactured incompany's Chakan plant with annual capacity of 0.8 mn units.p y p p y

Lighting:Lighting BU markets various products ranging from General Lighting Services (GLS)lamps, Fluorescent tube lamps (FTLs), Compact fluorescent lamps (CFLs), and Light-EmittingDiodes (LEDs). Luminaries BU undertake projects in modern workspace lighting, retaillighting, roadway ,lighting, area lighting and industrial lighting.

Engineering & Project (E&P):E&P division which contributes ~30% to BJE’s total revenue, operates in three sub-segments;A) Special projects: This sub-segment mainly includes turnkey projects like factorylighting, airport lighting, rural electrification etc. Company has a dominating position in thisspace and some of its prominent clients include- BHEL, NTPC, Airport authority of India andother electricity boards.B) High masts and poles: It undertakes design, supply, erection and commissioning of highmasts, signage and street lights. Company is the leader in this category and enjoys over60% market share.C)Transmission line tower: It undertakes design, supply, erection and commissioning oftransmission lines, telecom towers and monopoles (next generation transmission towers).Some of the major clients of the company are Power Grid, Damodar Valley, MaharashtraElectricity Board and other state utilities.

E&P P j i O d b kE&P P j i O d b k

39.9%42.9%

Transmission Line Towers (TLT)High mast & pole

Special Projects

29273147

Transmission Line Towers (TLT)High mast & pole

Special Projects

E&P Project‐ segment wise Order book position (Rs. In Mn) as on July 2011

E&P Project‐ segment wise Order book contribution as on July 2011


17.2% 1263


Income Statement (` in Mn):

DESDRIPTION FY08 FY09 FY10 FY11 FY12E FY13ENet Sales & Operating Income 13815.9 17657.1 22286.3 27407.5 31508.0 37808.2Increase/Decrease in Stock ‐391.6 ‐73.6 ‐332.2 ‐753.8 ‐86.0 ‐488.0Raw Material Consumed 10049.1 12812.2 16357.8 21087.2 23271.9 28189.0Power & Fuel Cost 15.8 16.7 38.9 41.2 31.8 38.1Employee Cost 609.0 708.5 885.1 1119.2 1271.2 1525.4Employee Cost 609.0 708.5 885.1 1119.2 1271.2 1525.4Other Manufacturing Expenses 583.7 586.1 678.3 802.3 953.4 1144.1General and Administration Expenses 350.7 457.0 560.8 686.8 794.5 953.4Selling and Distribution Expenses 883.8 972.8 1319.8 1462.7 1747.9 2097.5Miscellaneous Expenses 270.4 407.4 569.8 657.0 794.5 953.4Less: contract Expenses Capitalized 0.0 17.3 155.7 217.9 0.0 0.0Total Expenditure 12370.8 15869.8 19922.7 24884.8 28779.2 34413.0Operating Profit (Excl OI) 1445.2 1787.3 2363.6 2522.7 2728.8 3395.2EBITDA Margin/ Op. Profit Margin (%) 10.5% 10.1% 10.6% 9.2% 8.7% 9.0%Oth I 81 6 110 9 105 3 136 2 149 8 149 8Other Income 81.6 110.9 105.3 136.2 149.8 149.8Operating Profit 1526.7 1898.2 2468.9 2658.9 2878.6 3545.0Interest 337.6 412.6 370.7 362.8 473.3 580.5PBDT 1189.1 1485.6 2098.2 2296.1 2405.3 2964.5Depreciation 74.5 85.5 92.0 107.6 104.6 114.0Profit Before Tax 1114.6 1400.1 2006.2 2188.5 2300.7 2850.5Provision for Tax 383.3 506.7 753.5 739.9 779.3 977.4Profit After Tax 731.3 893.4 1252.7 1448.6 1521.4 1873.1Net Profit Margin (%) 5.3% 5.1% 5.6% 5.3% 4.8% 5.0%Adjusted EPS 8.5 10.3 12.8 14.7 15.4 18.9

DESCRIPTION FY08 FY09 FY10 FY11 FY12E FY13ESOURCES OF FUNDS:Share Capital 172.9 172.9 195.1 197.7 197.7 197.7Share Warrants & Outstanding 13.2 28.4 1.6 0.2 0.2 0.2

Balance Sheet (` in Mn):

Share Warrants & Outstanding 13.2 28.4 1.6 0.2 0.2 0.2Total Reserves 1561.8 2248.8 4747.0 5913.2 7156.3 8751.1Shareholder's Funds 1747.8 2450.1 4943.7 6111.1 7354.2 8949.0Total Debts 2367.0 2138.5 1518.3 1164.7 1971.9 1759.0Total Liabilities 4114.8 4588.7 6462.1 7275.8 9326.1 10708.0APPLICATION OF FUNDS :Net Block 916.2 946.0 1016.2 1532.8 1566.7 1600.7Capital Work in Progress 3.0 24.8 0.9 0.0 40.7 41.6Investments 223.3 315.6 365.6 365.8 365.8 365.8I i 1621 8 1777 0 2094 3 2946 4 3620 8 4642 9Inventories 1621.8 1777.0 2094.3 2946.4 3620.8 4642.9Sundry Debtors: Unsecured 4253.5 5591.6 7507.0 10653.7 11099.8 15210.6Cash and Bank 319.6 538.1 612.4 481.3 522.1 930.9Other Current Assets 0.2 0.0 0.0 0.0 0.0 0.0Loans and Advances 889.5 1131.2 1790.6 1667.7 1661.4 1521.1Total Current Assets 7084.5 9038.0 12004.4 15749.1 16904.1 22305.5Current Liabilities 3645.3 5191.6 6287.0 9661.3 8828.6 12795.8Provisions 425.7 512.6 643.0 730.7 757.1 853.4Total Current Liabilities 4071 0 5704 2 6930 0 10392 0 9585 7 13649 1


Total Current Liabilities 4071.0 5704.2 6930.0 10392.0 9585.7 13649.1Net Current Assets 3013.6 3333.8 5074.4 5357.1 7318.3 8656.4Deferred Tax Assets / Liabilities ‐41.3 ‐31.5 5.0 20.1 34.5 43.4Total Assets 4114.8 4588.7 6462.1 7275.8 9326.1 10708.0


DESCRIPTION FY08 FY09 FY10 FY11 FY12E FY13EProfit Before Tax 1114.6 1400.1 2006.2 2188.5 2300.7 2850.5Adjustments for: 0.0 0.0 0.0 0.0 0.0 0.0Depreciation 74.5 85.5 92.0 107.6 104.6 114.0Interest on loans 381.2 455.7 370.7 362.8 473.3 580.5Interest received 0 0 0 0 55 9 72 0 79 2 79 2

Cash Flow Statement (` in Mn):

Interest received 0.0 0.0 ‐55.9 ‐72.0 ‐79.2 ‐79.2Dividend Received 0.0 ‐0.3 ‐1.0 ‐1.1 ‐1.1Interest Received (Considered as Operating) ‐44.2 ‐42.9 55.9 72.0 79.2 79.2Changes In working Capital ‐603.8 55.0 ‐1564.0 ‐827.8 ‐1926.8 ‐1069.5Cash Flow after changes in Working Capital 962.3 2054.8 957.8 1834.2 963.8 2490.1Direct Taxes Paid ‐377.7 ‐542.4 ‐912.0 ‐806.1 ‐770.1 ‐808.2Extra & Other Item (Prior Period Items) ‐0.3 ‐2.1 ‐5.5 ‐2.9 0.0 0.0Cash From Operating Activities 584.4 1510.2 40.3 1025.1 193.7 1681.9Purchase of fixed assets ‐91 1 ‐147 5 ‐146 8 ‐631 1 ‐178 5 ‐189 0Purchase of fixed assets ‐91.1 ‐147.5 ‐146.8 ‐631.1 ‐178.5 ‐189.0Sale of fixed Assets 8.3 1.5 2.5 3.6 0.0 0.0Advances of capital nature ‐169.3 ‐28.3 ‐247.8 419.5 25.8 0.0Redemption on Investment 0.0 0.0 0.0 0.0 0.0 0.0Purchase of Investment ‐0.3 ‐92.3 ‐50.0 ‐0.2 0.0 0.0Loan given to companies (Associates) 26.5 ‐154.2 57.5 0.0 0.0 0.0Dividend Received 0.0 0.1 0.3 1.0 1.1 1.1Cash Flow from Investing Activities ‐217.4 ‐420.6 ‐384.3 ‐207.1 ‐151.6 ‐187.9Capital Subsidy 0.0 0.0 ‐1.0 0.0 0.0 0.0Capital Subsidy 0.0 0.0 1.0 0.0 0.0 0.0Proceeds from Issue of Equity Share Capital 0.0 0.0 1634.2 55.5 0.0 0.0QIP Issue Expenses 0.0 0.0 ‐34.8 0.0 0.0 0.0Bonus share issue expenses 0.0 ‐0.2 0.0 0.0 0.0 0.0Interest Paid ‐336.9 ‐418.3 ‐368.9 ‐365.3 ‐473.3 ‐580.5Proceeds from / (repayment of) borrowings ‐4.7 ‐228.5 ‐620.2 ‐353.7 807.2 ‐212.9Forex (loss) / Gain 12.7 ‐57.4 8.6 ‐10.3 ‐12.5 ‐14.9Profit / (loss) on Hedging 0.0 ‐5.6 1.4 ‐1.0 0.0 0.0Dividends paid 0.0 ‐138.3 ‐171.7 ‐235.4 ‐278.0 ‐238.4Income tax on dividend paid 0.0 ‐23.6 ‐29.4 ‐38.9 ‐44.9 ‐38.4Expenses on issue of shares ‐0.2 0.0 0.0 0.0 0.0 0.0Cash from Financing Activities ‐341.1 ‐871.0 418.3 ‐949.0 ‐1.3 ‐1085.2Net Cash Inflow / Outflow 25.9 218.6 74.4 ‐131.0 40.7 408.9Opening Cash & Cash Equivalents 293.7 319.6 538.1 612.4 481.3 522.1Closing Cash & Cash Equivalent 319.6 538.1 612.4 481.3 522.1 930.9

Key Financial Ratios:

Key Financial Ratios: FY08 FY09 FY10 FY11 FY12E FY13EOperating Profit Margin (%) 10.5% 10.1% 10.6% 9.2% 8.7% 9.0%Net Profit Margin (%) 5.3% 5.1% 5.6% 5.3% 4.8% 5.0%Debt/ Equity (x) 1.4 0.9 0.3 0.2 0.3 0.2ROA (%) 17.8% 19.5% 19.4% 19.9% 16.3% 17.5%ROE (%) 41.8% 36.5% 25.3% 23.7% 20.7% 20.9%EV/ EBITDA (x) 2.5 1.2 9.6 9.9 5.6 4.3EV/ Sales (x) 0.3 0.1 1.0 0.9 0.5 0.4


P/ E (x) 10.2 2.8 17.4 16.7 9.1 7.4P/BV (x) 0.9 0.2 4.4 4.0 1.9 1.5Adj. EPS (Rs.) 8.5 10.3 12.8 14.7 15.4 18.9

Toll Free: 1800 220 370 SMS : “KC RESEARCH” to 58888 Email : [email protected]

CONTACT US :

INSTITUTIONAL RESEARCH :

Research Analyst Sector Allocation E-mail Direct Nos.Research Analyst Sector Allocation E mail Direct Nos.Amit Anwani Capital goods, [email protected] 022 - 30287987

Construction & Realty

F&O AND TECHNICAL RESEARCH :F&O AND TECHNICAL RESEARCH :

Research Analyst Sector Allocation E-mail Direct Nos.Jaldeep S. Vaishnav F&O Analyst [email protected] 022 - 30284401Muralidhar Shenoy Senior Analyst [email protected] 022 - 30288158Kapil Vasania Analyst [email protected] 022 - 30288160Nemish Shah Analyst [email protected] 022 - 30288159

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