Havells India - Nirmal Bang Institutional

- Havells India (HIL) standalone/consolidated revenue grew by a mere 1.8%/2.5% at Rs10,513mn/Rs18,226mn, respectively, 10.6%/8.2% below our estimate and 10.2%/6.0% below Bloomberg consensus estimates, respectively. Operating margin of Sylvania was down 144bps/216bps YoY/QoQ, respectively, at 3.9% due to weak demand and subdued revenue growth.

- Consolidated operating margin at 8.4% was 58bps/103bps below our/Bloomberg consensus estimates, respectively. We have cut our revenue/operating profit/adjusted net profit estimates by 1.6%/3.3%/2.4%, respectively, for FY14 and by 2.2%/3.8%/2.0%, respectively, for FY15.

- As already pointed out in our initiating coverage report dated 25 March 2013, following lower growth momentum in domestic operations, declining returns on incremental capital and weak free cash flow we expect a downside in HIL stock price.

- We have retained our Sell rating and SOTP based revised target price of Rs577 (from Rs603 earlier) on HIL, valuing the stock at 14.2x/10.0x FY15E P/E and EV/EBITDA, respectively.

Source : Equity Bulls

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