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Bajaj Electrical Limited

Company Description: Bajaj Electricals Limited (BEL) is a diversified electrical companyand is a subsidiary of Bajaj Group. The company manufactures, erects and commissionstelecom towers, wind energy towers, transmission line towers and mobile telecom towers.Products offered by the company include microwave ovens, juicers & mixer grinders,lamps, tubes, fans, torches, water filters, oven toaster grillers, personal coolers, sandwichtoasters, steam & dry irons, desert coolers, room heaters and toasters. The company oper-ates through five strategic business units, namely, Home Appliances, Fans, Lighting, Lumi-naries and Engineering & Projects.

Key takeaways:

Management expect topline to grow by 20-22% in FY12. Management will be implementing Theory of Constraints which will help the com-

pany to maintain/manage certain buffer inventory. Order book of the company currently stands at ~`800cr and provides revenue visibil-

ity for next 1-1.5 years. Around `150cr order book will be completed within 3-6months and remaining within 1-1.5 years. The company expects increased orders inthe domestic markets.

In the E&P segment, management remains cautious due to the intense competitionand plans to participate in projects without compromising too much on profitability.

The company has bid for about `1,000 crores of TLT business, `100 croresHighmast and street lights and`726 crores of lighting projects.

Management expects order inflow for FY12 to be around`1200cr

Plans to launch Bajaj Shopping stores across India. Recently, opened its first BajajShopping shop at Dadar, Mumbai and plans to open around 20-25 shops in FY12.Bajaj Shopping stores will sell all the Bajaj Electrical products & Morphy Richardsproducts (premium category) under one roof.

Company plan to launch 4 new products such as Water purifier, Water pumps, Pres-sure cooking and Industrial fans by FY12E.

Huge distribution network across India

Company will be spending around 2-2.5% of its revenue on advertisement expense. Debt, which is primarily working capital related currently stands at`130 crores.

Average Interest rate for FY11 was 9.5%; however expected to be up over 100 bps inFY12E.

Capex for FY12E is`50cr.

Nifty and Stock Movement

Not Rated

BJEL.BO, BJE IN

CMP:`

254Price Target: UR

Tushar Das

(91-22) 3028-4714

tushar.das@uljk.in

ULJK Financial Services Private Limited

ULJK research reports are available on Bloomberg (ULJK

We wish to inform you that we recently met the management of Bajaj Electri-

cal Limited and the following are the key takeaways from the meeting.

June 20, 2011

Financial Performance of the Company

Management Visit Note

Capital Goods Electric Equipment

Please refer to the important dissures and analyst certifications aend of the document

Source: Company, ULJK Research

Market Data

Market Cap. (Rs Mn) 24

Outstanding Shares (Mn) 9

52 Week High/Low (Rs) 347/ Avg. Volume

Face Value

Shareholding

Promoter 6

MF/ Banks/ Indian Fis

FII/ NRIs/ OCB

India Public/ Others

(`in mn) FY07 FY08 FY09 FY10 FY11A

Net Sales 10,773 13,732 17,641 22,272 27,394

- Growth 27% 26% 27% 26% 22%

EBITDA 854 1,419 1,782 2,419 2,566

EBITDA Margins 8% 10% 10% 11% 9%

Adj. PAT 385 731 891 1,171 1,438

EPS 44.6 42.3 51.6 12.0 14.5

P/E 5.7 6.0 4.9 21.1 17.4

EV/EBITDA 4.7 4.4 3.2 10.4 9.8

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180.00

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BJE Price N

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Average working capital day requirements are as follows:

Lighting - 2-2.5 months Appliances - 25 days

Engineering & Project - 6-7 months

Average Inventory days are as follows Lighting - 1 month

Appliances - 1 month

The company would focus on selling its low-end products in fans, irons, toasters and CFLs in the ruralsegment. This plan is to ensure that the rural foray brings in 10% additional sales in the next couple ofyears.

Market share segment wise are as follows: Lighting & Luminaries - 8%

Fans - 16%

Appliances - 15%

.

Valuation: At CMP 254, the stock is trading at P/E 17.4x FY2011. We intend to initiate coverage on thestock and recommend the stock with positive outlook view.

Bajaj Electrical Ltd

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Financial Statements Rs in Million

Source: Company, Capitaline, ULJK Research

Bajaj Electrical Ltd

COMPANY/FINANCE/PROFIT AND LOSS/51/Bajaj ElectricalCmbDetail0CmbCommonsize0CmbAnnual0Profit & Loss Statement FY06 FY07 FY08 FY09 FY10 Cash Flow Statement FY06 FY07 FY08 FY09 INCOME : Cash Flow SummaryNet Sales 8,490 10,852 13,816 17,657 22,286 Cash and Cash Equivalents at Beginning of the yea 167 191 294 320 Other Income 95 66 94 128 254 Net Cash from Operating Activities 221 293 592 1,510 Stock Adjustments 116 77 392 74 332 Net Cash Used in Investing Activities (125) (243) (226) (421) Total Income 8,701 10,994 14,302 17,859 22,872 Net Cash Used in Financing Activities (72) 53 (341) (871)

Total Expenditure 7,969 10,066 12,776 15,963 20,409 Net Inc/(Dec) in Cash and Cash Equivalent 24 103 26 219 Operating Profit 732 929 1,526 1,896 2,463 Cash and Cash Equ ivalent s at End of the year 191 294 320 538 Interest 199 253 338 413 370Gross Profit 533 676 1,188 1,483 2,093 Ratio Analysis FY06 FY07 FY08 FY09 Depreciation 64 73 75 86 92 Key RatiosProfit Before Tax 469 603 1,114 1,398 2,001 Debt-Equity Ratio 2.4 2.3 1.75 1.13

Tax 171 217 383 506 830 Long Term Debt-Equity Ratio 1.22 1 0.68 0.46Reported Net Profit 298 385 731 891 1,171 Current Ratio 1.23 1.2 1.24 1.28

Extraordinary Items (0) 1 5 (2) (5)Adjusted Net Profit 299 385 726 893 1,176 Turnover Ratios

Fixed Assets 7.6 9.0 10.8 12.8

Balance Sheet 200603 200703 200803 200903 201003 Inventory 9.2 10.0 10.0 10.5SOURCES OF FUNDS : Debtors 3.8 3.5 3.6 3.6Share Capital 102 86 173 173 195 Interest Cover Ratio 3.4 3.4 4.3 4.4

Reserves Total 805 1,082 1,562 2,277 4,749 PBIDTM (%) 8.3 8.3 10.9 10.6Total Shareholders Funds 908 1,168 1,735 2,450 4,944 PBITM (%) 7.6 7.7 10.3 10.1

Total Debt 1,928 2,372 2,367 2,139 1,518 PBDTM (%) 6.1 6.1 8.5 8.3Total Liabilities 2,836 3,540 4,102 4,589 6,462 CPM (%) 4.1 4.1 5.7 5.5APPLICATION OF FUNDS : APATM (%) 3.4 3.5 5.2 5.0

Net Block 940 909 916 946 1,016 ROCE (%) 26.2 27.8 39.0 42.6Capital Work in Progress 0.3 5.7 3.0 24.8 0.9 RONW (%) 41.7 41.5 54.1 44.7Investments 149 223 223 316 366Total Current Assets 4,385 5,656 7,085 9,038 11,990 DUPONT MODELTotal Current Liabilities 2,559 3,181 4,084 5,704 6,916 NP / PBT (X) 0.6 0.6 0.7 0.6

Net Current Assets 1,826 2,475 3,000 3,334 5,074 PBT / EBIT (X) 0.7 0.7 0.8 0.8Miscellaneous Expenses not written off 6.3 0.2 - - - EBIT / Sales (X) 0.1 0.1 0.1 0.1Deferred Tax Assets 34 47 77 85 118 Sales / Assets (X) 3.2 3.4 3.6 4.1

Deferred Tax Liability 121 119 118 117 113 Assets / Equity (X) 3.8 3.5 2.8 2.2Net Deferred Tax (87) (73) (41) (32) 5 ROE 42% 42% 54% 45%Total Assets 2,836 3,540 4,102 4,589 6,462

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