Orient Electric shares hit 20% upper circuit limit; InCred sees more upside

Shares of Orient Electric Ltd on Monday zoomed 20 per cent to settle at Rs 252.35 on BSE. At this price, the stock has climbed 9.67 per cent in 2024 so far compared to a 10.70 per cent rise in benchmark Sensex.

InCred Equities has retained its 'Add' call on the counter after the company saw a "healthy revenue growth" in the second quarter of financial year 2024-25 (Q2 FY25). "Orient Electric's Q2 FY25 revenue grew 16 per cent year-on-year (YoY) (-13 per cent QoQ) to Rs 660 crore, 3.9 per cent above our estimate and 5 per cent above the Bloomberg or BB consensus estimate. The ECD segment's revenue was up 21 per cent YoY at Rs 440 crore while the lighting and switchgear segment grew 8.4 per cent YoY to Rs 220 crore," the brokerage stated.

"Overall gross margin improved by 210 bps (basis points) YoY due to price hikes and cost-saving initiatives. EBITDA came in at Rs 35.7 crore, up 73 per cent YoY (-11 per cent QoQ), 2 per cent above our estimate and 15 per cent above the BB consensus estimate. The EBITDA margin was up 175 bps YoY at 5.4 per cent (+10 bps QoQ). PAT came in at Rs 10.4 crore (vs a net loss of Rs 20 lakh in Q2 FY24) - 27 per cent QoQ, in line with our estimate and 17 per cent above the BB consensus estimate," InCred also said.

"Increased premiumisation, at 30 per cent currently, and strong growth in BLDC fans drove the growth. Fans contributed 40 per cent to total revenue, touching Rs 264 crore in Q2 FY25, benefitting from the ongoing product developments, including in-house PCB production for BLDC fans, which now contribute 25 per cent to ceiling fan sales," it further said.

The domestic brokerage has pegged Orient Electric's stock at a value of Rs 314 due to the above-mentioned factors, suggesting a potential upside of 24.43 per cent in a year.

"Orient Electric is optimistic about sustaining its operating leverage and margin improvement in the long run. DTM (direct-to-market) sales achieved a 35 per cent growth in Q2 FY25. We maintain our estimates for FY25F-27F and retain an 'ADD' rating on the stock with a target price of Rs 314, valuing it at 42x Sep 2026F EPS," InCred underscored.

As of September 2024, promoters held a 38.31 per cent stake in the company.