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Bajaj Electricals to be in focus on large order win, stock up 5%

Bajaj Electricals Ltd. (BJE) has won orders of Rs3,578cr from MVVNL under the Saubhagya Yojna of Government of India.
Bajaj Electricals (BJE) has won orders for rural/urban electrification work on turnkey basis. The timeline for the project is about 15 months from the date of issue of letter of intent (LOI).

In 9MFY18, BJE derived ~51% of revenue from consumer durables (CD) and ~49% from engineering and projects (E&P) solutions E&P (which includes ~26% from lighting division). BJE’s current order book of ~Rs3,000cr in E&P segment provides healthy revenue visibility.

The order is of great significance to BJE as with this order the company’s order book has more than doubled to ~Rs6,500cr.

We are positive on BJE as in E&P, BJE is developing its capabilities in EHV sub-stations, underground EHV cables and pursuing opportunities overseas. Further, government’s thrust on strengthening power T&D is expected to lift E&P sales to ~10% CAGR (FY17-20E) (not considering revenue from the recently won orders). Strong presence in tier 2&3 cities will help it leverage on increasing rural demand due to favorable monsoon. Successful implementation of Range and Reach Expansion Programme (RREP) will lead to direct sales and quick replenishment of inventory. This will help BJE gain back its market share and expand margins to 7.4% by FY20E (vs 5.6% in FY17). BJE’s asset-light CD business (~ 90% of products are outsourced) will ensure superior returns (ROCE 30%+).

Bajaj Electricals Ltd is currently trading at Rs647.60 up by Rs28.4 or 4.59% from its previous closing of Rs619.20 on the BSE. The scrip opened at Rs640.30 and has touched a high and low of Rs659.65 and Rs640.30 respectively. So far 6,92,556 (NSE+BSE) shares were traded on the counter.