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Bajaj Electricals Ltd's performance has improved in most segments. The momentum in consumer products remains strong, growing 31% year-on-year during Q2. 

Appliances, fan, lighting, and Morphy Richards range, all impressed with 13-41% year-on-year growth. While appliances and Morphy Richards range led the growth momentum, lighting has shown a strong rebound and fans business that had lost sales in the peak summer season also made a comeback.

"Consumer products segment of Bajaj Electricals continued its strong growth momentum led by the continuous launch of new innovative SKUs (53 in Q2), distribution expansion of Morphy Richards, and strong double-digit growth across appliances, fans and lighting," said analysts at ICICI Securities Ltd.

Margins in the consumer products business nevertheless faced challenges from rising commodity costs. The company also is seeing a rise in promotional spending and normalization of costs. Impacted by steep inflation in input prices, the gross margins were down 566bps YoY. The cost-saving initiatives by the company nevertheless yielded benefits and limited the impact on EBITDA margin that was down only 136bps YoY.

While cost pressure is continuing, analysts feel that the rising share of consumer products business and the company’s efforts on reduced losses in the EPC business will bode well for overall margins.

In the engineering, procurement and construction or EPC business, the company’s approach remains calibrated with a focus on project execution and selective new orders in-take. The company while is working on loss reduction. It's consolidating its leadership in the Illumination segment that marked 25% YoY growth. The carryforward order book of 758 crore remains healthy.

EPC business continues to see clean‐up actions and is expected to exit FY22 at breakeven levels, said analysts at Yes Securities Ltd.

The improvement in the balance sheet also remains a key positive. It was the 10th consecutive quarter of positive cash flow from operations that stood at 476 crores. Net debt lowered by 419 crores sequentially and net debt to equity ratio stood at 0.15 at the end of Q2.

Analysts at Yes Securities said that “We continue with our positive stance on the company as the company has demonstrated strong growth in Consumer products business with substantial improvement in the balance sheet".

The stock is up more than 15% in the current fiscal.

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