Accumulate Havells India; target of Rs 624: Geojit Financial Services

Geojit Financial Services' research report on Havells India

HAVL reported a revenue growth of 31% YoY in Q3FY18, led by Consumer durable and Lighting & fixture segment which grew by 35% & 26% YoY respectively largely on account of water heaters, Fans and LED segment witnessing strong growth. Switch gears segment witnessed some revival with a growth of 4% YoY was driven by launch of new switches. The volume from Cables & wires witnessed de-growth, however led by pass through of higher copper prices revenue grew by 3% YoY.

Outlook

HAVL is trading at a 1 year FWD P/E of 41x which is significant premium. However, we believe that this premium valuation to given its focus on premiumisation, strong brand recall and investment in new product categories. Given lower GST rates going forward, we expect earnings to grow at healthy 20% CAGR over FY17-20E. We roll our estimates to FY20E and value HAVL at P/E of 38x to arrive at a target price of Rs.624 and maintain to Accumulate.