BOSCHLTD - Bosch Ltd Share Price

Management Outlook:
Bosch Limited's management anticipates a stable global growth environment tempered by geopolitical uncertainties, trade conflicts, and inflationary pressures. Domestically, India's growth is expected to slow cyclically due to weakening consumption and cautious business sentiment, though RBI rate cuts (up to 75 basis points in 2025) may support growth. The automotive sector, while resilient, faces mixed trends:

• Passenger vehicles (4% YoY growth) remain strong due to SUV demand and rural recovery.
• HCVs are subdued due to mining/construction slowdowns, while LCVs and three-wheelers face muted demand.
• Tractors and two-wheelers show recovery linked to rural sentiment and festive demand.

Strategic Initiatives:

• Focus on EVs (Vehicle Control Units, accelerator modules) and compliance with OBD2 norms (implementation by April 2025).
• Adoption of GenAI for product lifecycle management and R&D advancements in engine control systems.
• Divestiture of non-core building technologies division (6% EBIT margin; minimal financial impact).

Financial Highlights (Q3 FY24-25):

• Revenue grew 6.2% YoY to Rs.44,657 million, driven by aftermarket, two-wheeler, and consumer goods segments.
• EBITDA margins improved marginally (0.7% YoY) despite restructuring costs (Rs.471 million provision).
• PAT declined due to exceptional items and FY23 one-time gains from divestitures.

Key Risks & Focus Areas:

• Managing inflationary pressures, competitive pricing, and shifting demand in automotive segments.
• Leveraging India's manufacturing potential for global supply chains amid geopolitical shifts.
• Sustaining aftermarket growth (8.8% YoY) and margin resilience through productivity measures.

The company remains committed to innovation (software-hardware integration, hydrogen tech) and macroeconomic agility to navigate near-term challenges.

Question 1:
"Our employee cost has been elevated as a percentage of revenues. What band of employee cost as a percentage of revenue do you normally target?"
Answer:
Employee costs were elevated due to higher engineering/service project closures, impacting expenses. In steady state, employee costs are targeted at 8"“10% of revenue, depending on product mix and productivity.

Question 2:
"What has been the rental income for the first nine months, and how does it compare to last year?"
Answer:
Rental income increased by ~6.5% YoY for April"“December 2024 due to higher demand for office space and annual adjustments aligned with market prices.

Question 3:
"What is the rationale for divesting the building technologies division, and what are its profit contributions?"
Answer:
The division (revenue: ~Rs.400"“450 crore, EBIT margin: ~6%) is part of Bosch's global portfolio realignment. The sale aligns with strategic focus on core mobility and industrial businesses, with minimal margin impact.

Question 4:
"How is Bosch India leveraging opportunities from manufacturing shifts from Europe to India?"
Answer:
Bosch continuously assesses global production networks for localization/export potential. India's R&D and manufacturing capabilities are integrated into Bosch's global strategy, with ongoing projects to capitalize on market shifts.

Question 5:
"What drove aftermarket growth (8.8% YoY), and why isn't its higher margin fully reflected in EBITDA?"
Answer:
Aftermarket growth was driven by diesel components, batteries, and exports. Margin dilution arose from weaker power solutions sales and product mix dynamics, despite steady aftermarket profitability.

Question 6:
"How does Bosch plan to maintain leadership in mobility amid EV/alt-fuel shifts (e.g., hydrogen)?"
Answer:
Bosch invests 6"“8% of sales in R&D globally, including India. Innovations in hydrogen, electrification (e.g., eAxles), and software integration (via BGSW) strengthen partnerships with OEMs.

Question 7:
"Why did consumer goods margins decline sharply this quarter?"
Answer:
Margins dipped due to seasonal inventory adjustments by dealers in December. Performance is expected to recover in subsequent quarters, aligned with market demand cycles.

Question 8:
"What is the nature of the Rs.471 crore restructuring cost, and will this continue?"
Answer:
The one-time cost relates to operational adjustments in mobility for competitiveness (e.g., product mix, productivity). No further restructuring costs are anticipated in the near term.

Question 9:
"What content increase does Bosch expect from OBD2B norms for two-wheelers?"
Answer:
Bosch did not specify exact content increases but highlighted readiness for OBD2 regulations (effective April 2025), driven by exhaust sensor sales and collaborations with OEMs.

Question 10:
"What caused the 350 bps QoQ gross margin improvement?"
Answer:
Improvement stemmed from material cost optimization, favorable product mix, and carryover effects of price adjustments with customers.