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  • Stock recommendation: MIRC Electronics Ltd – ACCUMULATE – TP Rs.32

    Publish date: August 17, 2018

    Result Update

    Expectedly, MIRC reported weak set of numbers for the quarter. Apart from decline in revenue, forex loss, cost pressures and overheads weighed on the margins.

    Key Highlights

    • Revenue declined by 4% y-o-y on the back of weak performance of the room AC segment.
    • Forex loss of Rs 37 mn erased 190 bps from the EBITDA margins.
    • The room AC industry had planned for a growth of 20% in Q1FY19. As against this, the industry actually contracted by 13% y-o-y.
    • As a result, there is excess inventory holding in channels by around 60 days. This is likely to put pressure on pricing and liquidation pressures may continue till the festive season.

    Valuation & Outlook

    • Post revision in earnings, MIRC is trading at 21x and 16x FY19E and FY20E earnings respectively. The stock's valuation is at a discount to peers in the consumer durables space. One of the reasons being weak earnings numbers in recent quarters.
    • We remain positive on the consumer durables demand growth story in India. However, we would prefer to wait for the company to deliver better numbers on the earnings front. Hence, we move our rating a notch lower to "Accumulate" (BUY on declines) from "BUY" earlier.


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