Performance marred by input cost hikes and lack of demand especially from the rural areas | Bajaj Electricals Q3 FY22 Conference Call

Revenue from operations was down 12.02 per cent to Rs 1,319.81 crore during the quarter under review as against Rs 1,500.14 crore in Q3FY21 and 1% up in QoQ terms.

Operating profit declined by 5% on QOQ and 35% on YoY basis. Operating margins at 6.9% as opposed to 7.2% in Q2FY22 mainly due to raw material inflation.

Profit declined to 48 Crore which is -23% on QoQ and -51% on YoY basis.

Consumer Products (CP): Moderate 6% YoY de-growth on higher base. Volume de-growth mainly due to high base effect (heavy pent-up demand in Q3 FY’21) and greater exposure to rural segment (in overall mix) which has witnessed substantial slowdown; Surpassed INR 1,000 crores mark (2nd highest historical high). Operating Margin at 9.0% (dilution of 330 bps (basis points) mainly on a/c of rise in input costs & negative operating leverage). 2-year Operating Profit (EBIT) CAGR in excess of 20%.  Gross Margin & EBIT dilution in excess of 200 & 300 bps resp. mainly on a/c of commodity headwinds & no price-hikes taken in Q3.

Channel Highlights: Balanced Portfolio b/w Trade and Alternate (68: 32). Robust growth in emerging “Institution Channel” (60% YoY), albeit on small base. Widening exports reach: Foray into new territories of Iraq, Maldives & Burkina Faso.

Engineering, Procurement and Construction (EPC): Overall revenue de-growth mainly due to selective new orders in-take. Consolidation of leadership in Illumination (flattish on YoY basis vs double-digit Industry de-growth). Carry Forward Order Book of INR 607 crores (Illumination – 178, PT - 376, PD - 53 crores)

Price hikes: From 11- 17% across the categories from Jan-21 to Sep-21. No hikes taken in Q3FY22. 3-5% price hikes in Q4 will be taken based on competitive intensity and demand.

Normally Q3 is the best quarter for the company in terms of sales. But company is not seeing a secular growth and the company expects Q4 also to be average quarter.

Region wise General commerce sales: East- 30%+, West- 22%+, North- 19%, South- 14%.

Distribution: 2.2 Lakh retailers. Ecommerce constitutes 9% of the total sales.

Management has said that in Lighting category they are behind their competitors. They need to invest more in the product mix as well as marketing.

Corporate Restructuring: New Company “Bajel Projects Limited (BPL)” incorporated. Power Distribution & Power Transmission business segments to be demerged to BPL on a going concern basis. Mirror shareholding in both companies (1:1 ratio).