Hold Havells India target of Rs 1126: Prabhudas Lilladher

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Prabhudas Lilladher's research report on Havells India

HAVL’s has indicated robust outlook led by 1) improvement in consumer sentiment 2) benefits of increased distribution reach in smaller towns/ rural India and 3) market share gains from unorganized players despite some trade up stocking ahead of price increases. Lloyd remains on track to recovery benefitting from 1) in-house manufacturing in RAC 2) change in industry dynamics post import prohibitions 3) network expansion and 4) one stop offering with launch of refrigerators. We estimate gross margin pressure due to commodity inflation, however lower ad spends, higher value growth and benefits of cost savings and low base will enable strong growth for next 2 quarters.

Outlook

We estimate margins to expand by 360bps to 14.5% over FY20-23 which will enable 24.8% PAT CAGR. We assign a target price of Rs1,126 based on DCF (implied PE of 49.5xFY23 EPS) and assign Hold rating (Under Review Earlier).

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