Bosch trades highest since March 2020, surges 13% in range-bound market

Since May 22, post Q4FY20 results, Bosch has outperformed the market by surging 45 per cent as compared to 18 per cent rise in the benchmark S&P BSE Sensex index.

Bosch shares hit a four-month high of Rs 13,556, ralling 12 per cent in the intra-day trade, on the BSE on Tuesday in an otherwise range-bound market, and were trading at their highest level since March 4, 2020. At 01:29 pm, the stock of the auto ancillary company was trading 11 per cent higher at Rs 13,358 as compared to 0.38 per cent rise in the S&P BSE Sensex. 

Since May 22, post January-March quarter (Q4FY20) results, the stock price of Bosch has outperformed the market by surging 45 per cent as compared to 18 per cent rise in the benchmark S&P BSE Sensex index.

The company reported a subdued set of overall Q4FY20 numbers amid muted OEM volumes for the quarter. Net standalone revenues came in at Rs 2,237 crore, down 18.6 per cent year on year (YoY). Reported standalone EBITDA margins came in at 15.3 per cent, down 353 bps YoY on the back of negative operating leverage.

“Q4FY20 saw the first quarter of Bosch outperforming underlying industry growth. This was led by the initial benefit of a BS-VI content increase and the 2Ws segment addition. We expect this trend to continue, barring substantial divergence in segmental trends,” Motilal Oswal Financial Services said in result update.

During the financial year 2019-20 (FY20), Bosch made provision of Rs 717 crore towards various restructuring, reskilling and redeployment initiatives. The company said these provisions are in line with the company’s transformation initiatives and has been made to capitalize on opportunities emerging in electromobility and other mobility.

The company’s standalone cash flow from operation generation during the year improved to Rs 1,336 crore against Rs 593 crore in FY19.

Courtesy wide-ranging demand side challenges, consequent perils of negative operating leverage, analysts at ICICI Securities expect margins to slip further to 14.5 per cent in FY21E.

"However, on the back of support from pent up demand in FY22E, its structural actions on cost front (ongoing efforts in restructuring operations, reskilling, redeployment of manpower), they are seen rebounding to 16.6 per cent by FY22E. It continues to evolve as solutions provider," it said. The brokerage firm believes it would continue to command higher margins than pure product providers.