Buy Havells India; target of Rs 460: Emkay

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Buy Havells India; target of Rs 460: Emkay

Emkay Global Financial Services is bullish on Havells India and has recommended buy rating on the stock with a target of Rs 460 in its December 8, 2011 research report.

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Emkay Global Financial Services is bullish on Havells India and has recommended buy rating on the stock with a target of Rs 460 in its December 8, 2011 research report.

"H1FY12 has seen strong growth for Havells with revenues growing 24% to Rs 16.7bn (including standard electric financials) and APAT growing by 21% to Rs 1.4bn. Higher contribution from new products in Lighting & Fixtures (L&F) and Electrical Consumer Durables (ECD) division alongside consolidation of Standard Electricals and distributor sales against retail sales were the key drivers to growth. In order to sustain this growth momentum, Havells plans to double its network from 4,000 distributors to 8,000 over next 3 years and increase contribution from new products."

"Sylvania's revenues for H1FY12 grew 2.3% to €222mn, with Europe being flat at €133mn, while LATAM grew 5.1% to €76mn and Asia grew 12% to €13mn. The Europe operations, which is perceived to be affected, is infact largely stable - as almost 70% of revenue earned comes from Germany, France and UK, which are least impacted by Euro zone crisis. Only 15% of revenues come from crisis hit countries like Spain, Portugal, Greece, etc, where business has already shrunk by 50%, thereby lending resilience to revenues from the region. We have assumed no growth in revenues from Europe operations for FY12E. LATAM and Asia are growth markets; hence expect these regions to drive 3% revenue growth for Sylvania in FY12E."

"Until H1FY12, Havells has reported strong performance despite rising concerns on business operations from development in macro environment. Our interaction aptly indicates at continuity of growth momentum in domestic business operations and strengthening of international operations. We believe that robust growth across segments led by expanded distribution network and new product launches would drive domestic business, while continuous focus on improving operational efficiencies would result in sustained profitability for Sylvania. We retain 'BUY" with price target of Rs 460, thereby implying target multiple of 8.6x FY13E EV/EBIDTA. Currently, Havells is trading at 7.9x FY13E EV/EBIDTA," says Emkay Global Financial Services research report.

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