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Dolat Capital Report
Orient Electric Ltd.'s revenue increased 11%, was in line with our estimate. electrical consumer durables revenue grew 17% on a favorable base, led by fans (+ 25%). Lighting and switchgear segment reported flattish revenue, led by switchgear. Revenue from international business doubled in Q2 FY24.
Orient Electric's gross margin improved 400 basis points due to better price realisation, cost optimisation project Sanchay (Rs 140 million saving in Q2) and mix improvement. Continued investment in capability and brand building impacted Ebitda margins.
Heightened competitive intensity in the fans category, and investment in people and processes are likely to limit margin expansion in the near term.
Fans growth in Q3 will be lower due to unfavorable base. Also, delay in operationalisation of Hyderabad facility will restrict incremental revenue from fans in FY24.
We have cut our FY24/25E earning per share estimates by 23%/17% to Rs 4.4/6.6 respectively and introduced FY26E EPS at Rs 8.6. We downgrade to 'Reduce' with a target price of Rs 240 (28 times FY26E EPS).
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