INSUBCONTINENT EXCLUSIVE:
Emkay Global Financial Services has a buy call on Bajaj Electricals with a target price of Rs 735.
The current market price of Bajaj
Electricals is Rs 540.75.
Time period given by the brokerage is one year when Bajaj Electricals price can reach the defined target
Investment rationale by the brokerageNew product launches to drive growth: Our interactions with distributors indicate that BJE has been
ahead of the competition in capturing market share in tier-2 and rural markets, thanks to its distribution network
BJE has lined up new product launches in the premium and mass categories and the premium segment is growing faster than the mass market,
BJE will support new product launches by spending on advertisements via TVs and other mass media platforms
This was the fifth consecutive quarter of 20 per cent plus revenue growth under the new distribution model
Almost 81 per cent/86 per cent of earnings will come from the consumer business in FY20/21E
Our target price of Rs 735 is based on SoTP valuation (Rs 664 for consumer business based on 35x EPS FY20E and Rs 71 for project business
Keys risks are: 1) sharp rise in input costs, 2) price war by competition and 3) higher working capital requirement in project business.
