Buy Havells India; target of Rs 665: Cholamandalam Securities

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26 Aug, 2025 12:21

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Cholamandalam Securities' research report on Havells India

HIL’s standalone revenue (net of GST) grew by 30.5%YoY to INR 19.7bn aided by Lloyds consumer durables, electrical consumer durable and lighting & fixtures segments. In 3QFY18, Lloyds Consumer Durables reported revenue of INR 2.93bn up 8.6% QoQ (+16% YoY). Revenue (net of GST) excluding Lloyd grew 14% YoY, aided by Lighting & Fixtures and electrical consumer durables segments.  Standalone Gross margin improved by 30bps YoY to 39.7%; EBITDA at INR 2.62bn, up 37.5% YoY; EBITDA margins improved by 67bps YoY to 13.3%; Employee cost was flat, ad spend were higher due to brand investment in Lloyds consumer business (+50bps YoY) and other expenses (-80bps YoY). A.PAT grew by 17.9%YoY to INR 1.8bn, adjusting for the exceptional income of INR 210mn and A.PAT margin fell by 99bps YoY to 9.2% due to lower other income and higher effective tax rate. Company witnessed sharp increase in the creditor and Inventory days from 91/69 days in 2QFY18 to 104/73 days in 3QFY18, due to higher inventory of consumer durables of Lloyds in preparation for A/C season. Management has guided for a Capex of INR 2bn each for FY18 & FY19.

Outlook
We introduce FY20E estimates Revenue/EPS 20% / 22.8% YoY. At CMP the stock trades at 51.7X, 42.1X & 34.3X FY18E, FY19E & FY20E respectively. We roll over our valuation to FY20E, valuing the company 40XFY20E EPS to arrive at a target price of INR 665 (earlier: INR 459) and upgrade the stock to a BUY rating. Risks:  Higher built-up in dealer inventory, competition from both foreign and domestic players and speedy market share gain from unorganized players.
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