Motilal Oswal is bullish on Havells India has recommended buy rating on the stock with a target price of Rs 590 in its research report dated December 06, 2017.
Motilal Oswal's research report on Havells India
Havells India (HAVL) has consistently identified and entered new product categories over the years (see Exhibit 1). Some of the key categories where it has made a successful entry include lighting in 2003, premium fans in 2005, water heaters in 2010, REO Switches in 2012, air coolers in 2014, re-launch of the Standard brand in 2016 (target of INR10b by FY20) and entry into EHV cables. The recent acquisition of Lloyd gives HAVL a strong foothold in the fast growing durables segment – the aim is to double revenue in the next three years through new product launches, expansion of existing product portfolio and increased channel penetration (in talks with large format stores to stock Lloyd products).
We expect HAVL to report 21% EPS CAGR over FY17-20, with EBITDA margin expanding 40bp to 13.8%. With the Lloyd acquisition, HAVL has turned itself into a complete electricals and durables behemoth, and is well positioned to tap into the under-penetrated Indian market. Our target price is based on 35x Dec’19 EPS (in line with Crompton Consumer Electricals).
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