Buy Havells; target of Rs 360:Motilal Oswal

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26 Aug, 2025 12:21

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Motilal Oswal's research report on HavellsHAVL’s 3QFY16 adjusted PAT at INR1.2b (flat YoY) was below our and consensus estimates of INR1.3b. The miss was primarily due to lower-thanestimated EBITDA margin at 13.5%(-100bp YoY) v/s estimate of 14.7%. The company increased its advertising spend to INR0.56b (4.2% of sales) during 3QFY16 v/s INR0.32b (2.6% of sales) in 3QFY15) to push sales during the festive season and increase presence in Tier 2 and Tier 3 towns. Going forward, the company has guided for ad spends in the region of 3.5-4% as it continues to invest in its brand. Employee costs rose 21% YoY to INR1b on account of pay hikes and increased manpower.  Gross margins at 42% (+260bp YoY) were the highest since FY10 on the back of lower raw material prices (primarily copper and plastic), cost efficiency measures, better price management and policy discipline.  Segments that witnessed strong growth: Consumer durables (+23% YoY), lighting (+9% YoY) and cables (+6% YoY). Switchgear sales were flat YoY at INR3.3b. We maintain Buy with a price target of INR360. We ascribe a 28x PE multiple and roll forward our target price to FY18. We incorporate the divestment of Sylvania from 4QFY16 and build in higher other income as a result of the proceeds of INR8.8b received in 4QFY16. 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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