Accumulate Havells India; target Rs 600: Emkay

Emkay Global Financial Services is bullish on Havells India and has recommended accumulate rating on the stock with a target of Rs 600 in its December 18, 2012 research report.

“Havells has launched new products like Reo (mass market switch), Murano (premium end switch), XPRO (premium switchgear), Endura (LED lighting) and AURA (remote control lighting). In addition, Havells has set up Luminaries manufacturing facility by investing Rs 1bn, which would help reduce outsourcing from China and also maintain the product’s quality standard. Havells has also focused on softer aspects of the business like maintaining high service standards by setting up toll free numbers and service centres to address customer queries with quick turnaround time. We believe these factors would supplement growth for the domestic business.”

“Although Sylvania displayed weak results in last 2 quarters, recent round of price increase (3-4%) has led to marginal improvement in Europe, while LATAM region continues to be revenue driver growing at 8-10%. Factors like replacement business, cross selling of new products, improving distribution reach and venture in US market would drive growth in LATAM. While, EBIDTA margin sustenance remains a challenge in near term, Sylvania is expected to maintain its 6% guidance led by price increases and cost efficiencies. Improving growth in LATAM, cost management measures and reduced interest cost would drive profitability over the medium term. Subsequently, management has guided for 9-10% EBIDTA margins over 3 years.”

“Post the top management meeting of Havells, there is no change in our estimates. We continue to remain positive on domestic business and expect distribution, branding and new products to drive 17% revenue CAGR over FY12-FY14E. We are at the lower end of the domestic business growth guidance of 15-20%. While for Sylvania, we believe revenues would remain flat to marginally positive led by LATAM, but better cost management and price increases would help maintain Sylvania margins at 6% for FY13E. The stock is trading at 16.5x FY14E earnings and at 9.7x FY14E EV/EBIDTA. Maintain accumulate with price target of Rs 600,” says Emkay Global Financial Services research report. 

Bodies Corporate holding more than 50% in Indian cos 

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