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Target: ₹375
CMP: ₹263
Revenue for Q2-FY23 declined 14 per cent y-o-y to ₹510 crore and missed our estimate. The miss was largely led by dealers destocking fans due to the BEE rating transition, a change in Orient Electric’s (OEL) distribution strategy and weak exports caused by geopolitical issues. OEL reported a net loss of ₹30 lakh vs our profit estimate of ₹21 crore. Excluding the impact of one-offs on revenue and costs, PAT would have been in line with our expectation.
OEL generated 60 per cent of its revenue from fans in FY22. The ongoing BEE transition in fans due to take effect from January 1, 2023, has led to channel destocking, denting OEL’s primary sales.
Initially, the fan volume would get hit by the GTM strategy, but subsequently help gain market share.
OEL has entered the wire business and the initial response from channel partners has been good. It is following an asset-light model for this business and has adopted outsourcing. OEL does not want to grow aggressively in this segment, but is looking to enhance its product offerings and explore cross-selling.
We cut our FY23/FY24/FY25 EPS estimates by 27 per cent/13 per cent/5 per cent to factor in the Q2-FY23 performance.
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