EUR 120.00 For Business Accounts Only

MOSL: BOSCH (Neutral)-Above est; revenue outperformance continues

BOSCH: Above est; revenue outperformance continues

(BOS IN, Mkt Cap USD6.2b, CMP INR15519, TP INR16650, 7% Upside, Neutral)

 

Margin recovery awaited; hinges on localization and operating leverage

• Bosch (BOS)'s 1QFY22 performance was driven by higher revenues and better gross margins. We expect growth in BOS to rebound faster on account of (a) the revival of the CV cycle, (b) the addition of the 2W segment, and (c) content increase. BOS' stock price largely reflects all the negatives, but there are no major re-rating catalysts on the anvil.
• We upgrade our FY22/FY23E EPS by 4%, accounting for better sales growth. Maintain Neutral, with TP of INR16,650.

 Stronger revenue growth in both businesses, but margins falter

• 1QFY22 revenues / EBITDA / adj. PAT declined 24%/33%/25% QoQ to INR24.4b/INR3b/INR2.6b.
• Auto revenues declined 22% QoQ (+164% YoY) and Non-Auto revenues 34% (+60.5% YoY). On the other hand, other operating income grew on the reversal of provisions of INR376m.
• The gross margin improved 250bp QoQ (-120bp YoY) to 41.1% on a favorable product mix, cost cutting, and the pass-through of commodity costs. Better gross margins restricted EBITDA margin contraction (-180bp QoQ) to 12.5% (v/s est. 11%). EBITDA declined 33% QoQ to INR3.1b (v/s est. INR2.45b).
• Lower interest income was offset by lower depreciation, resulting in PAT of INR2.6b (v/s est. INR2.1b).