Buy Havells India; target of Rs 415: Edelweiss

Edelweiss's research report on Havells India

Havells India (HAVL) reported in line EBIDTA and PAT growth of 12% and 22% YoY, respectively, despite 2% revenue miss, led by 25% surge in consumer durables business. However, industrial segment (switchgears & industrial cables) reported muted growth of mere 5%. We appreciate the robust growth in consumer durables, which was driven by better-than-industry spurt in fans, geysers and domestic appliances. Management is pinning hopes on H2-based industrial recovery. We believe HAVL will sustain its industry-leading growth riding robust distribution and an expanding product portfolio which equips it to efficiently penetrate Tier II/III cities. Maintain ‘BUY’ with TP of INR415, at which the stock discounts its FY18E earnings by 30x with an EPS CAGR and RoE of 25% and 26%, respectively.

HAVL is prudently focusing on efficiently leveraging its existing dealer base for new product launches. Also, with more than 70% of current sales driven by Tier I cities where the company is in pole position, it is now gearing to expand presence in Tier II/III cities, which we believe will drive much higher growth than peers. We maintain ‘BUY/SP. The stock is currently trading at 30x its FY17E and FY18E EPS estimates.