MOSL: BOSCH (Neutral)-Below est-Sharp miss on topline-Benefit of BS-4 on revenues not visible

​Bosch: Below est; Sharp miss on topline; Benefit of BS-4 on revenues not visible

(BOS IN, Mkt Cap USD9.9b, CMP INR20458, TP INR19965, 3% Downside, Neutral)

• Benefit of higher BS-4 ASPs not yet visible: Revenues grew 6.8% YoY to INR28.1b (est. INR34.2b), as against ~6.6% growth in addressable auto industry growth. Auto segment revenues grew ~8.8%, driven by very strong double digit growth in diesel business and strong double digit growth in gasoline business, but impacted by decline in aftermarket. Non-Auto segment grew by 6.7% YoY due to double digit growth in security tech and solar. Domestic growth came in at 6.5% while exports grew healthy by 40% YoY led growth mainly from diesel segment exports to European and Brazil.
  
• Product mix, higher trading content impacts EBITDA margin: EBITDA margin decreased 50bp YoY (+140bp QoQ) to 18.1% (est 18.5%) mainly led by lower gross margins (-500bp YoY). RM cost was higher due to unfavorable mix, higher trading content (due to import of BS4 systems) and also lower aftermarket sales. Other expenses down 14% YoY (-4.5% QoQ) to INR4b (est INR5.8b) on one time provision and relocation cost in 2QFY17. Lower other income further impacted PAT decline by 16.5% YoY to INR3.5b (est INR4.4b).
  
• Earnings call highlights: a) The management has maintained cautiously optimistic outlook for 2HFY18. b) Car multimedia business stopped in 2QFY18 impacting revenues. c) Aftermarket marginal negative growth due to GST. d) Material cost to remain at this level till localization improves. e) Decline in other income was led by lower MTM gains. f) EV business would be placed within listed entity, with initial focus on 2W & 3W segment and later explore other segments.