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Last Updated : Nov 24, 2016 04:40 PM IST | Source: Moneycontrol.com

Buy Havells India; target of Rs 388: Geojit BNP Paribas

Geojit BNP Paribas is bullish on Havells India has recommended buy rating on the stock with a target price of Rs 388 in its research report dated November 24, 2016.

 
 
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Geojit BNP Paribas' research report on Havells India


Demonetisation reform will impact consumer discretionary spending due to liquidity crunch. Usually consumer discretionary goods sales are largely in cash. The real estate sector which is already impacted by downtrend due lower demand situation is aggrieved by demonetisation, which may further lead to slow down in the medium term. HAVL‟s key segments Switch gears and Cables & wires (64% of overall sales) are dependent on real estate demand which is expected to underperform in the near term. Positively, we believe that in longer term, as GST is implemented the unorganised players will lose business as price advantage lose out. Further, demonetisation will also lead to higher tax compliance, ultimately benefiting organised players like HAVL to gain market share. Considering the current scenario, we expect that H2FY17 revenue growth is likely to be muted. We lower our revenue estimates by 7% & 8% for FY17E & FY18E, respectively.


Currently, HAVL key segments Switch gears and Cables performance is not encouraging given lower industrial and construction activity. Further, current liquidity crunch is expected to impact consumer discretionary spending in H2FY17 which is likely to extent to HAVL‟s consumer durables segment. But given long term benefit of shift from unorganised to organised segment, the long term outlook is positive. However, considering the near term impact on earnings, we revise downwards our earnings estimates for FY17E& FY18E by 7% & 7.2% respectively. We value HAVL at 30x, while we roll our estimates to FY19E with target price of Rs388. We upgrade our rating to „Buy‟ from Reduce as we believe that the near term negatives are largely factored in the stock price.

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First Published on Nov 24, 2016 04:40 pm
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