Havells India,Asian Paints, Apollo Tyres are on the radar of Geojit Financial Services
Geojit Financial Services recommends the following stocks:
Havells India (HAVL) is a leading player in electrical consumer goods in India.
Q4FY17 revenue growth was healthy at 17 percent YoY; however, PAT growth was limited to 7 percent YoY. EBITDA margin declined by 180 bps YoY to 13.4 percent due to higher incentives paid to dealers and delay in price hikes. Given the near-term impact on margins, we lower our FY18E earnings estimates by 3.8 percent. We factor 17 percent CAGR earnings over FY17-19E. We value HAVL at P/E of 35x (33x earlier) on FY19E and Lloyd consumer business at Rs 26 to arrive at SOTP target price of Rs 485, while downgrade to reduce.
Asian Paints (APNT) is the market leader in the Indian paint manufacturing industry with a market share of about 53 percent.
Q4FY17 sales grew by 8.9 percent YoY led by low double-digit volume growth & a price hike of 3 percent in March 2017. While EBITDA margin declined by 108bps YoY due to increase in crude, TIO2 prices & other expenses. Pickup in rural demand is reducing the impact of demonetisation, while the forecast of normal monsoon & implementation of GST will give ample impetus to the paint industry. Due to rich valuation & recent outperformance in stock price we maintain our hold rating by valuing at a P/E of 40x FY19E EPS.
Apollo Tyres (ATL) has been in the business of manufacturing and selling tyres since its inception in 1972, it commands a dominant market share of 25 percent in the truck tyre segment.Q4FY17, consolidated sales grew by 10.3 percent YoY owing to healthy volumes growth. India/Europe business is expected to grow at a CAGR of 14-17 percent over FY17-19E led by enhanced capacities across both the geographies. However, EBITDA margin declined 534bps YoY to 11.1 percent on account of higher natural rubber prices. Given ATL’s dominant position in TBR segment coupled with robust brand equity, improving pricing environment in the sector with declining threat of Chinese imports, we expect revenue/PAT to grow at a CAGR of ~16-17 percent over FY17-19E.