Oct 31, 2012, 12.45 PM | Source: Moneycontrol.com
Emkay Global Financial Services is bullish on Havells India and has recommended accumulate rating on the stock with a target price of Rs 600 in its October 29, 2012 research report.
, Emkay Global Financial Services |
“Havells India, results below est. - revenues at Rs 9.6bn, up only 13.5% yoy led by decline in industrial cables; EBIDTA margins fell 120bps to 12.4% & APAT at Rs 870mn, up 24% yoy. Sylvania yet again disappoints with revenues declining 5% yoy to €109.6mn and EBIDTA margin falling to 3-year low of 3.3%. Adjusted for exceptional items, post net loss of €1.5mn. Management confident on domestic business at 15-20% revenue growth & 12.5-13% EBIDTA margins, but cuts Sylvania EBIDTA margin guidance further to 6% for FY13E. Revise earnings estimate by -6% and -8% for FY13 & FY14E following weakness in Sylvania business.
Havells standalone results were below expectations on Revenue & EBIDTA front. (1) Revenue grew just 13.5% yoy to Rs 9.6bn as slower industrial activities led to 16% yoy decline in industrial cables. (2) One-off expenses (custom duty in Switchgear), ad cost (Rs 348mn in Q2FY13 vs Rs 142mn in Q2FY12) and costly imports impacted EBIDTA, which grew 3.3% yoy to Rs 1.1bn (3) Subsequently, EBIDTA margins fell 120bps yoy to 12.4% (4) Forex gain of Rs 101mn in Q2FY13 vs forex loss of Rs 131mn led by 24% yoy growth in APAT to Rs 870mn.
For the first time in last few quarters, Havells reported muted domestic business growth. On Sylvania, EBIDTA margins continued to decline, with management cutting margin guidance further to 6% for FY13E. As of now, we have assumed Sylvania margins in line with guidance, but there are chances of further downgrades as the demand environment in Europe continues to be weak. The only hope is demand revival during lighting season in Europe in H2FY13. We downgrade Havells to Accumulate with target price of Rs 600," says Emkay Global Financial Services research report.
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