Bajaj Electricals Q1 FY27 earnings call

Bajaj Electricals reported an encouraging start to FY27 with an overall revenue growth of 2.3% year-on-year. A key highlight was the significant improvement in EBIT margin, which expanded to 6.6% from 2.5% in the previous year. This margin expansion was attributed to focused execution, channel consolidation, cost efficiency, and strengthening the foundation built in FY26. The company also saw a 130 bps improvement in overall gross margins, with the consumer product segment contributing 220 bps to this improvement.

The Consumer Products segment returned to growth, registering a 1.7% increase in revenue, and achieved a positive EBIT margin of 3.9%, a notable turnaround from a negative 1.7% in the prior year. While cooling products contracted, non-summer products showed meaningful expansion and double-digit growth across categories. Morphy Richards, following its acquisition in the last quarter, also contributed with double-digit growth. The company aims to achieve a 10% EBIT margin for this segment in the long term, driven by premiumization and operating leverage.

Lighting Solutions continued its strong momentum, growing by 4.4% in Q1 FY27, building on a robust performance in the previous year. This growth was fueled by double-digit growth in consumer lighting. However, the segment's overall margins were temporarily impacted by legacy professional lighting projects with fixed contracts and rising commodity prices. Management expects to return to double-digit margins for overall lighting once these legacy contracts are exited in the next one to two quarters, through continued premiumization and mix changes.

Bajaj Electricals targets an overall revenue growth of 8-10% quarter-on-quarter and for the next two years, outpacing the industry's projected 6-7% growth. The company plans to stabilize overall margins between 6-7% for the next two years, with a long-term aspiration to reach 10% EBIT margin. Strategic focus includes driving innovations, expanding market shares, strengthening brands, and demand generation. The company is also exploring new growth avenues in infrastructure-driven segments like solar, wires, and cables.

The company maintains a dual focus on both numeric reach expansion and improving throughput per store. E-commerce contributes approximately 15% to overall sales, aligning with industry averages, and has shown double-digit growth. Alternate channels collectively contribute around 45% of the business. Management confirmed that stock correction efforts have resulted in healthier inventory positions compared to previous quarters, providing a more stable base for growth.

The quarter faced challenges from continued input cost inflation and uneven summer demand. The fans business experienced a decline due to operational issues and supply chain disruption^🌐s, including gas shortages and PCB availability, which are now being addressed. Margin pressure in professional lighting from legacy projects is expected to be temporary. While competition is intensifying, management believes its strong brand, innovation, and go-to-market initiatives will allow it to maintain or grow market share across most categories, with specific actions underway for fans.