Buy Havells; target of Rs 350:Emkay

Emkay's research report on HavellMisses estimates, export decline weigh on revenues - Revenue +8% yoy to Rs 13.5bn. EBITDA margin at 13.5%, -80bps and APAT at Rs 1.2bn, +4% yoy Domestic steady at 11% led by electrical durables and LED. Volumes strong in cables & wires. Exports decline in switchgear & lighting which mute revenues. Hinted visible positivity in consumer sentiments and expects growth to potentially accelerate in FY17 High operating cost and ad spends offset strong gross margins to lead to 80bps EBITDA margin decline to 13.5%. Focus on cost efficiencies, better mix and cost efficiencies are margin levers, but higher revenues will drive margins upwards Cut revenue by 2% each and FY16 EPS by 6%. Remain positive on domestic business dynamics led by penetration, new products & uptick in economic activity. Expect 12% revenue CAGR & 20% PAT CAGR over FY15-18E. Retain BUY with PT of Rs 350/share Barring exports decline, domestic revenue was in line. Positive momentum was visible in pockets like ECD, cables and LED; company expects growth rates to improve in FY17. We have cut our revenues by 2% FY16/17/18E and earnings by 6% in FY16, while due to rise in other income due to proceeds of stake sale of Havells Malta, our FY17/18E are upped by 1%/3%.We remain positive domestic business and expect uptick in demand sentiments to drive revenues. We maintain BUY with revised price of Rs 350/share (27x FY18). We expect PWGR to report PAT of INR61.2b (up 20% YoY) in FY16 and INR72.6b in FY17 (up 19% YoY). The stock trades at PER of 10x and P/B of 1.5x on FY17E basis. DCF-based TP of INR178/sh. Maintain Buy. For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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