Analysts predict strong growth for Bajaj Electricals amid cost optimization and premium products

ET Intelligence Group: The stock of Bajaj Electricals rose 24% in a month after announcing its March 2025 quarter results, outperforming the 1% decline in the ET Consumer Durable index. The company expects double-digit operating margin (EBIT margin) in the next three years, driven by premiumisation of products and cost optimisation. It has also incorporated a subsidiary in the UAE to boost exports. Analysts have revised revenue CAGR to 11.5% for FY25-27 from 9% earlier.

The company has given guidance of double-digit EBIT margin for the consumer durables segment over the next three years. For FY26, it expects the margin to improve to 6% from 3.2% in FY25. However, expanding profitability will be challenging given the company's plan to increase the share of advertising and promotional expenses in revenue to 3.5-4% from 3% in the previous year. Additionally, the provision made by the company to manage the end-of-life stage of products or the extended producer responsibility (EPR) is likely to double in FY26 from the previous year. These factors may affect the margin trajectory.

"Management is targeting a 6% margin for consumer products, which we believe will be tall given higher A&P spends and EPR provisions," stated Yes Securities in a report. On a year-on-year basis, revenue from operations grew by 6.5% to ₹1,265.5 crore in the March 2025 quarter, driven by growth in consumer products. Net profit surged 101.5% to ₹59 crore, on the back of exceptional profit of ₹21.4 crore from liquidation of few immovable properties. EBIT margins for consumer products improved to 3.9% in the March 2025 quarter from 1.8% in the year-ago quarter. However, lighting solutions' margin contracted to 7.8% from 8.5%. According to the company management, lighting margin may improve as price erosion in some of the categories in consumer lighting is behind and prices have stabilised.

The company's strategy to focus more on premiumising the product portfolio and launching more products could be time consuming, according to Yes Securities. "The company will have to navigate the challenges on the kitchen appliances side which is facing pressure from smaller regional players," the brokerage added. It has upgraded stock to 'neutral' from 'sell' following the fall in the price and improved profitability. The brokerage expects the company's Ebitda and PAT to grow annually by 20% and 26%, respectively between FY25-27.