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Bosch Ltd – Affected by Auto Slowdown

March 10, 2009

The slump in automobile sales in Q408 adversely affected Bosch’s performance and accordingly sales declined by 15% y-o-y to INR10.4bn. A higher contribution from the non-automotive business affected EBITDA margins which declined sequentially by 200bps to 16.8%.PAT declined by 24% y-o-y to INR942mn.

Penetration of diesel cars in India (~20% in India vs. ~53% in Western Europe) is set to increase as OEMs plan to launch CRDi-powered diesel cars. Also, diesel is ~40% cheaper than petrol in India. Already we have seen that diesel powered cars areoutperforming petrol powered cars in the downturn in terms of sales. CRDi-powered cars are more fuel efficient than petrol cars, and are quieter than other diesel cars. Bosch Ltd., the leading supplier of CRDi systems, should benefit from the increasing penetration (40% by 2010e) of diesel cars in India.

BOSCH Ltd reported an EPS of Rs 197 for FY08 [Dec] and is expected to report an EPS of Rs 172 for FY09.

The company has strong and clean management, net cash position and strong balance sheet. The Promoter Group holds a ~70% stake in the company and is looking to increase this level. The limited free float and Promoter’s willingness to increase its stake in the company acts as a defence against share price weakness in the wake of weak business performance.

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