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Research
Havells India (HAVL IN) - Strong revenue growth, Margin impacted due to demonetization schemes - CSEC Research
Posted On : 2017-05-12 22:23:46( TIMEZONE : IST )
Strong revenue growth, Margin impacted due to demonetization schemes
- HIL's standalone revenue grew by 17.2%YoY to INR 17.1bn; Revenue growth was aided by ECD, Switchgear & cables segment and market share gain across category from unorganised players. Revenue from cable business grew by 12%YoY in 4QFY17 to INR 7,601.4mn, growth in cable was mainly due to increase in the commodity prices. Cable EBIT margin fell by 150bps YoY to 11.5%.
- Electrical Consumer Durables (ECD) segment grew by 28.4% YoY to INR 3.97bn; Growth was witnessed across product categories, particularly in water heater and fans. Management expects the traction in the ECD segment to continue owing to new product launches, channel expansion and higher export focus. EBIT margin fell by 360bps YoY to 24% due to demonetisation schemes.
- Switch gear segment grew by 15.1% YoY to INR 3.91bn in 4QFY17 led by EWA segment. Switch gear EBIT Margin fell by 50bps YoY to 36.8%. Lighting & fixtures (L&F) revenue marginally de-grew by 0.3% YoY in 4QFY17 to INR 2.39bn; LED & Fixture which accounts for 87% of the segment grew by 19% YoY and exports to Sylvania declined by 19% YoY. EBIT margins expanded by 320bps YoY to 26.5%.
Valuation: We are positive on Havells owing to strong brand equity, slew of product launches and strong focus on strengthening and building dealer network. At CMP the stock trades at 45.3X and 38.2X FY18E & FY19E respectively. We are valuing the company 35XFY19E EPS to arrive at a target price of INR 473 (earlier: INR 439) and downgrade the stock to MARKETPERFORMER rating.
Risks: Higher built-up in dealer inventory and slowing real estate demand and competition from both foreign and domestic players.
Shares of HAVELLS INDIA LTD. was last trading in BSE at Rs.512.35 as compared to the previous close of Rs. 513.95. The total number of shares traded during the day was 200671 in over 4114 trades.
The stock hit an intraday high of Rs. 519.85 and intraday low of 500.75. The net turnover during the day was Rs. 102686288.
