Appliances, fans, lighting and Morphy Richards series are all impressive with 13-41% year-on-year growth

Bajaj Electricals Ltd's performance in most areas has been improved. The momentum of consumer products remains strong, with a year-on-year growth of 31% in the second quarter. 

Appliances, fans, lighting and Morphy Richards series all achieved impressive year-on-year growth of 13-41%. Although the home appliance and Morphy Richards series led the growth momentum, the lighting rebounded strongly, and the fan business that lost sales during the summer peak season also made a comeback.

"Due to the continuous launch of new innovative SKUs (53 in the second quarter), Morphy Richards' distribution expansion, and strong double-digit growth in the home appliances, fans and lighting sectors, Bajaj Electricals' consumer products division continues to maintain strong growth momentum," the analyst Represents ICICI Securities Co., Ltd.

Nevertheless, the profit margin of the consumer goods business still faces the challenge of rising commodity costs. The company also sees an increase in promotional spending and cost normalization. Affected by the sharp rise in input prices, gross profit margin fell by 566 basis points year-on-year. Nonetheless, the company's cost-saving measures generated benefits and limited the impact on EBITDA margins, which fell by only 136 basis points year-on-year.

Although cost pressures persist, analysts believe that the rising share of the consumer goods business and the company's efforts to reduce EPC business losses will bode well for the overall profit margin.

In engineering, procurement and construction or EPC business, the company’s approach still focuses on project execution and selective acceptance of new orders. The company is also committed to reducing losses. It is consolidating its leading position in the field of lighting, with a year-on-year growth of 25%. The carry-forward orders of Rs 75.8 crore remained healthy.

Analysts at Yes Securities Ltd. said that the EPC business continues to take clean-up actions and is expected to exit at a breakeven level in FY22.

The improvement of the balance sheet also remains a key positive factor. This is the 10th consecutive quarter that operating cash flow has been positive, reaching 4.76 billion rupees. Net debt decreased by 41.9 billion rupees consecutively, and the net debt-to-equity ratio was 0.15 at the end of the second quarter.

An analyst at Yes Securities said: "We continue to be positive about the company because of the strong growth of the company's consumer products business and the significant improvement in its balance sheet."

The stock has risen by more than 15% in the current fiscal year.

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