Diesel vehicles drive Bosch’s performance

Diesel vehicles drive Bosch’s performance

Bosch Group’s results for 2010 show that the Asia-Pacific region posted the highest revenue growth of 42%. The performance of the Indian operations, which is part of this, measured up well with a 38% rise in revenue.

Around 85% of the company’s revenue in India come from the automotive segment, which has been doing very well in the past 18 months. This is reflected in Bosch India’s revenue growth of 30% year-on-year (y-o-y) to Rs1,884 crore in the quarter ended December 2010.

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This was 8% higher than analysts’ estimates and driven largely by the commercial vehicles segment and the increase in sales of diesel cars and utility vehicles. Revenue of the diesel systems segment grew by 30%, while the automotive after-market grew by 22%; exports grew by 24%.

But a rise in costs affected the company’s profitability, just like it did for most auto component firms. During the quarter, raw material costs rose from around 51% of sales to 54%. This impact was partly offset by savings on other overheads. The company’s operating profit margin, therefore, dropped by 75 basis points (bps) y-o-y. One basis point is one-hundredth of a percentage point.

The impact of rising costs is more evident with a sequential comparison. Operating margin fell by 200 bps compared with the preceding quarter.

Bosch posted an annual net profit growth of 46% in 2010 from Rs590 crore in the previous year. This was led by 200 bps rise in Ebitda (earnings before interest, tax, depreciation and amortization) margin to 18.5% from a year ago.

The company’s shares trade at Rs6,066 apiece, which discounts estimated 2012 earnings around 18 times. The Bosch management has announced capex of Rs1,300 crore over the next three years in India. This should help maintain growth at healthy levels and support the company’s current valuations.

Graphic by Sandeep Bhatnagar/Mint

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