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Research
Havells India - A solid performance; Buy - Anand Rathi
Posted On : 2013-05-30 20:55:13( TIMEZONE : IST )
Robust standalone performance. Havells India reported FY13 standalone revenues and EBIDTA of Rs. 42.3bn and Rs. 5.3bn respectively, and these were largely in sync with our estimates. Revenues and EBIDTA rose 17% each, on account of robust growth across product lines (save cables & wires). The electrical consumer durables (ECD) segment, in particular, registered a phenomenal, 38% yoy, growth in revenues to Rs. 7.9bn. PAT stood at Rs. 3.7m (up 22% yoy).
Sylvania numbers shaky. The international business reported lacklustre figures. At €440m, revenues were down 2% yoy on account weak sales in EU. At €23m, EBIDTA fell 37% yoy as gyrations in raw materials as well as currency took its toll. However, an exceptional gain of €26m enabled the operations to record a PAT of €31m for FY13.
Our take. The company intends to ramp up its dealer network in India's rural hinterland in order to boost sales of several products in its economy/midmarket range of switchgear and cables & wires (C&W). We believe this would have a multiplier effect on revenues of other segments such as lighting and ECD. Hence, there is a strong case for sustained growth in its earnings and cash flows in the next two years. With an annual capex outlay of Rs. 1bn for these years and little possibility of any inorganic growth in the near term, we believe its cash generation (standalone) should settle at Rs. 2bn pa on a conservative basis. In Sylvania, we expect revenues to inch up by 6% following its widening footprint in the emerging markets of Latin America. We firmly believe that its cash flows would suffice for its debt-repayment, obviating any fresh capitalization from its parent or from external sources. At the ruling price of Rs. 719, HI trades at a P/E and EV/EBIDTA of 16.9x and 10.5x respectively, discounting its FY14e figures. We have valued HI using the sum-of-parts method. We have marginally raised our price target to Rs. 767 (v/s Rs. 759 previously) and maintain Buy.
