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    Please refer to important disclosures at the end of this report 1

    EBITDA 329 379 (13.2) 478 (31.1)

    EBITDA Margin (%) 15.1 18.4 (327)bp 20.8 (567)bp

    Source: Company, Angel Research

    Bosch (BOS) reported lower-than-expected results for 2QCY2012 primarily due to

    raw-material cost pressures and a sharp increase in other expenditure which led

    to a 327bp yoy (567bp qoq) contraction in the operating margin. While raw-

    material cost pressures were on account of INR depreciation; other expenditure

    increased led by inflationary pressures and one time tooling cost of `20cr. We

    have revised downwards our earnings estimates to factor in the slowdown in the

    automotive sector and weak exports demand coupled with margin pressure due

    to unfavorable currency movement.

    For 2QCY2012, BOS reported

    a slightly lower-than-expected top-line growth of 5.6% yoy (down 5.3% mom) to

    `2,174cr due to sluggish growth in the commercial vehicle (CV) and tractor

    industry sales. The automotive segment revenues grew by a modest 5.1% yoy

    (down 4.4% qoq) due to flat growth in the diesel systems segment and 12% yoy

    decline in exports revenue. On the other hand, the non-auto segment posted a

    strong growth of 19.9% yoy (down 11.2% qoq) during the quarter. The EBITDAmargin fell sharply by 327bp yoy (567bp qoq) to 15.1%, primarily on account of

    increase in raw-material expenses led by INR depreciation (~100bp impact on

    the margins). Further, other expenditure too increased by 200bp yoy (280bp qoq)

    on account of inflationary pressures and one time tooling cost of `20cr (~100bp

    impact on EBITDA margin). Hence, the net profit posted a lower-than-expected

    bottom-line of `247cr, witnessing a decline of 11.3% yoy (26.3% qoq).

    While we are positive on the long term prospects of BOS

    due to its technological leadership and strong and diversified product portfolio;

    we expect the near-term environment to remain challenging for the company

    given the slowdown in the CV and tractor industry. At `8,681, BOS is fairly valued

    at 19.9x CY2013E earnings. Thus, we maintain our Neutral rating on the stock.

    % chg 37.8 18.3 11.0 13.8

    % chg 63.0 24.2 10.0 16.6

    EBITDA (%) 18.2 18.3 17.8 18.3

    P/E (x) 31.8 25.6 23.2 19.9

    P/BV (x) 6.7 5.8 4.8 4.0

    RoE (%) 20.9 22.6 20.5 19.8

    RoCE (%) 26.2 27.6 24.3 23.9

    EV/Sales (x) 3.5 2.9 2.5 2.2

    EV/EBITDA (x) 23.4 16.7 15.1 12.4

    Source: Company, Angel Research

    CMP `8,681

    Target Price -

    Investment Period -

    Stock Info

    Sector

    Bloomberg Code [email protected]

    Shareholding Pattern (%)

    Promoters 71.2

    MF / Banks / Indian Fls 15.0

    FII / NRIs / OCBs 6.4

    Indian Public / Others 7.4

    Abs. (%) 3m 1yr 3yr

    Sensex 10.2 5.5 14.6

    Bosch (2.2) 19.3 122.0

    Face Value (`)

    BSE Sensex

    Nifty

    Reuters Code

    Auto Ancillary

    Avg. Daily Volume

    Market Cap (`cr)

    Beta

    52 Week High / Low

    27,260

    0.3

    9,300/6,425

    1,288

    Net Debt (`cr) (1,857)

    10

    17,657

    5,363

    BOSH.BO

    022-3935 7800 Ext: 6844

    [email protected]

    Performance Highlights

    2QCY2012 Result Update | Auto Ancillary

    August 16, 2012

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    Bosch | 2QCY2012 Result Update

    August 16, 2012 2

    Exhibit 1:Quarterly financial performance (Standalone)

    Consumption of RM 743 564 31.7 728 2.0 1,471 1,310 12.3(% of sales) 34.2 27.4 31.7 32.9 31.6

    Staff costs 248 236 5.1 249 (0.6) 497 451 10.0

    (% of sales) 11.4 11.4 10.9 11.1 10.9

    Purchases of TG 495 582 (14.9) 526 (5.8) 1,021 1,011 1.0

    (% of sales) 22.8 28.3 22.9 22.8 24.4

    Other Expenses 359 299 20.2 315 14.2 674 600 12.4

    (% of sales) 16.5 14.5 13.7 15.1 14.5

    OPM (%) 15.1 18.4 20.8 (27.3) 18.0 18.6

    Interest - - - - - - (46) -

    Depreciation 76 50 52.3 64 18.7 140 97 44.1

    Other Income 89 72 23.1 67 33.3 156 84 86.3

    Extr. Income/(Expense) - - - - -

    (% of Sales) 15.7 19.5 20.9 18.4 19.4

    Provision for Taxation 94 122 (22.9) 144 (34.6) 239 252 (5.3)

    (% of PBT) 27.6 30.5 30.1 29.1 31.3

    Adj. PATM 11.4 13.5 14.6 13.1 13.3

    Equity capital (cr) 31.4 31.4 31.4 31.4 31.4

    Source: Company, Angel Research

    Exhibit 2:2QCY2012 Actual vs. Angel estimates

    EBITDA 329 449 (26.8)

    EBITDA margin (%) 15.1 20.1 (495)bp

    Source: Company, Angel Research

    For 2QCY2012 BOS posted a subdued growth of 5.6% yoy

    (down 5.3% qoq) in its top-line to `2,174cr, marginally lower-than-estimates, on

    account of sluggish CV and tractor sales. The automotive segment revenues grew

    by a modest 5.1% yoy (down 4.4% qoq) due to the flat growth in the diesel systems

    segment and 12% yoy decline in exports revenue. However, the automotive &

    electrical and power tools segments witnessed a strong growth of 40% and20% yoy respectively. On the other hand, the non-auto segment posted a strong

    growth of 19.9% yoy (down 11.2% qoq) during the quarter.

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    Bosch | 2QCY2012 Result Update

    August 16, 2012 3

    Exhibit 3:Segmental performance

    Automotive 1,922 1,828 5.1 2,010 (4.4) 3,932 3,673 7.1Others 244 204 19.9 275 (11.2) 520 431 20.7

    Less: Inter-segment revenue 9 13 18 (47.7) 27 18

    Automotive 276 335 (17.6) 423 (34.8) 699 684 2.1

    Others 8 21 (61.7) 27 (70.7) 35 42 (16.0)

    Add: Net interest income - - - - - - 46 -

    Less: Unallocable exp. (58) (46) 26.8 (30) 94.4 (88) (33) 164.5

    Automotive 14.3 18.3 21.1 17.8 18.6

    Others 3.2 10.2 9.8 6.7 9.7

    Source: Company, Angel Research

    Exhibit 4:Sluggish growth in top-line

    Source: Company, Angel Research

    Exhibit 5:Segment-wise revenue trend

    Source: Company, Angel Research

    BOS registered a sharp drop in its

    EBITDA margin to 15.1%, down 327bp yoy (567bp qoq) and significantly lower

    than our estimates of 20.1%. The sharp fall in the EBITDA margin was on

    account of increase in raw-material expenses led by INR depreciation and higher

    other expenditure. Raw-material expenses as a percentage of sales grew 130bp

    yoy (232bp qoq) mainly on account of INR depreciation which impacted the

    margins by ~100bp. Other expenditure as a percentage of sales too expanded by

    200bp yoy (280bp qoq) due to inflationary pressures and one time tooling cost of

    `20cr (~100bp impact on EBITDA margin). Thus, the operating profit declined

    sharply by 13.2% yoy (31.1% qoq) to `329cr.

    1,700

    1,7111,884

    2,086 2,060 1,991 2,040

    2,2952,174

    36.3

    31.929.5 30.7

    21.1

    16.4

    8.310.0

    5.6 0.0

    5.0

    10.0

    15.0

    20.0

    25.0

    30.0

    35.0

    40.0

    0

    500

    1,000

    1,500

    2,000

    2,500

    2QCY10

    3QCY10

    4QCY10

    1QCY11

    2QCY11

    3QCY11

    4QCY11

    1QCY12

    2QCY12

    (%)(`cr) Net sales Net sales growth (RHS)

    1,502 1,5511,614

    1,845 1,828 1,784 1,7742,010 1,922

    157 160 164 227 204 211 206275 244

    0

    500

    1,000

    1,500

    2,000

    2,500

    2QCY10

    3QCY10

    4QCY10

    1QCY11

    2QCY11

    3QCY11

    4QCY11

    1QCY12

    2QCY12

    (`cr) Automotive revenue Other revenue

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    Bosch | 2QCY2012 Result Update

    August 16, 2012 4

    Exhibit 6:EBITDA margin declines sharply to 15.1%

    Source: Company, Angel Research

    Exhibit 7:Net profit down 11.3% yoy

    Source: Company, Angel Research

    The companys net profitregistered a decline of 11.3% yoy (26.3% qoq) to `247cr which was 21.6% lower

    than our estimates, primarily due to a weak performance at the operating level.

    However, a lower tax-rate (at 27.6% vs 30.5% in 2QCY2011) benefitted the

    bottom-line to a certain extent during the quarter.

    Conference call Key highlights

    The management expects the automotive industry to register a relatively betterperformance in 2HFY2013.

    The CV and tractor industry witnessed sluggish sales during the quarter;however, light commercial and passenger vehicles recorded a healthy growth.

    Exports (contribute by 10-12% of the top-line) during the quarter declined 12%yoy due to weak demand in Europe and the US. While exports to Europe

    account for ~60% of the total export revenue, the remaining ~40% is derived

    from the US and Asia.

    The company now intends to incur capital expenditure of `400cr-`500cr inCY2012 which has been scaled down from the earlier levels of ~`600cr.

    The contribution of the diesel systems segment to sales is ~60%, automotiveafter-market contributes ~20%, automotive electrical constitutes ~10% and

    power tools/ starters and generators and gasoline contribute ~10%.

    Localization levels in CRDI systems are currently at 50%. The managementexpects to gradually improve localization going ahead.

    18.8 19.8 16.418.9 18.4 19.3 17.5

    20.815.1

    53.5 53.4 53.756.7 56.8 54.4 53.7 55.3

    57.4

    0.0

    10.0

    20.0

    30.0

    40.0

    50.0

    60.0

    70.0

    2QCY10

    3QCY10

    4QCY10

    1QCY11

    2QCY11

    3QCY11

    4QCY11

    1QCY12

    2QCY12

    (%) EBITDA margins Raw material cost/sales

    210 236 211 274 279 288 281 336 247

    12.3

    13.8

    11.2

    13.2 13.514.5

    13.8 14.6

    11.4

    0.0

    2.0

    4.0

    6.0

    8.0

    10.0

    12.0

    14.0

    16.0