Jan 29, 2013, 11.10 AM | Source: Moneycontrol.com
Nirmal Bang has maintained hold rating on Havells India with a target price of Rs 685 in its January 25, 2013 research report.
, Nirmal Bang |
Havells' reported improved performance in the domestic business and Sylvania margin started to pick-up after bottoming out last quarter. Havells' domestic operation has grown by 17.4% YoY and by 9.8% QoQ growth due to significant jump in electrical consumer and durable business due to growth in fans by 30% and success of newly launched domestic appliances. The EBITDA margin was up by 10bps YoY to 12.9% and down by 60bps QoQ due to Forex loss of Rs. 3.7 crore in Q3FY13; excluding that the margin was down by 100bps YoY to 13.3% in Q3FY13 and up by 110bps QoQ. Sylvania, on the other hand the EBITDA margin stood at 4.6% in Q3FY13 improved sharply on a QoQ basis (Q2FY13 margin: 3.3%) as Europe margin improved to 5% following price hikes. We believe that with its focus on profitability from Sylvania (margin improvement in Sylvania), sustained domestic demand, steadily expansion of product portfolio and strong free cash flow generation, Havells will continue to perform.
Valuation & Recommendation: At CMP of Rs. 659, the stock is trading at a PE of 19.8x FY13E and 15.4x FY14E. Havells has reported strong growth which was mainly driven by success of new product launches and expansion of Sylvania margin due to the pick-up in Europe and lesser interest cost. We have revised our estimates owing to steady domestic demand, success of new product launches which will accelerate the revenue growth and improvement in Sylvania margin. We have increased the EPS by 3.9% to Rs 33.3 FY13E and by 7.3% to Rs. 42.8 FY14E. We have revised our target price of Rs. 685 per share (PE 16x FY14E) from the earlier Rs. 559 per share. We recommend our investors to HOLD the stock," says Nirmal Bang research report.
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