Buy Bajaj Electricals; target of Rs 720: ICICI Direct
ICICI Direct’s research report on Bajaj Electricals
Bajaj Electricals’ (BEL) engineering, procurement & construction (EPC) division has seen a revival in performance post FY15 supported by new high margin orders. Also, BEL has bagged orders worth RS 2389 crore from Purvanchal Vidyut Vitaran Nigam, UP under the Saubhagya Yojana (government’s flagship rural electrification programme).
We believe BEL will record revenue, earning CAGR of ~19%, ~34%, respectively, in FY18E-20E supported by an increase in EBITDA margin. Under our SOTP based valuation, we value BEL’s CD segment MCap at 2x FY20E sales (~30% discount to peers) and E&P segment at 7x FY20E EV/EBITDA. We maintain our BUY rating with a revised target price of RS 720/share.
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