Bajaj Electricals dips 5% in a firm market on growth concerns

Shares of Bajaj Electricals declined 5 per cent to Rs 1,051 on the BSE in Wednesday's intra-day trade, in an otherwise firm market, on growth concerns due to weak demand.

In the past one month, the stock of the household appliances company has slipped 11 per cent as against 6.6 per cent decline in the S&P BSE Sensex. In the past six months, it slipped 20 per cent, as compared to a 6-per cent fall in the benchmark index. Moreover, the stock has corrected 34 per cent from its 52-week high level of Rs 1,589 touched on September 17, 2021. It had hit a 52-week low of Rs 895 on March 19, 2021.

For October-December quarter (Q3FY22), Bajaj Electricals reported 12 per cent year-on-year (YoY) drop in its revenue from operations at Rs 1,320 crore. Profit after tax (PAT) more-than-halved as it declined 51 per cent YoY at Rs 48 crore from Rs 98 crore in the year-ago quarter (Q3FY21).

The management had said the quarter witnessed the impact of increased commodity costs coupled with subdued demand scenario, leading to a deferral of price hikes for the consumer products business. EPC segment has delivered an EBIT (earnings before interest and tax) loss despite lower turnover, but continues to focus on project execution and remains cashflow positive, it said.

In the near term, consumer product segment demand is expected to remain soft. Company continues to improve its balance sheet. The company's board has approved demerging the power distribution and transmission business to a separate entity.

Kotak Securities has lowered its FY22E estimate on weaker than expected Q3FY22 performance and near term weakness in demand and margin pressure.

"Demand in the consumer product segment slowed down in Q3FY22, largely due to weaker demand in rural markets. While near term demand outlook is subdued, we expect gradual improvement over the medium term. Focus on cash flow generation and reduction in debt continues to strengthen the balance sheet. Weak demand and raw material headwinds remain a near term challenge," the brokerage firm said in a result update with 'reduce' rating. The stock, however, is below its target price of Rs 1,187 per share.