Sharekhan's research report on Honeywell Automation India
Q3FY23 performance was a mixed bag, wherein sales were above estimates but operating profitability lagged estimates. Revenue increased by 18.3% y-o-y to Rs. 1,017 crore (versus our estimate of Rs. 957 crore). Operating profit increased at a slower pace of 6.8% y-o-y to Rs. 130 crore (below our estimate of Rs. 167 crore) due to increase in raw material cost despite drop in staff cost. Consequently, OPM plunged 138 bps y-o-y to 12.8% (versus our estimate of 17.5%). Net profit was up 18% y-o-y to ~Rs. 106 crore (versus our estimate of Rs. 113 crore). As per company’s last media interaction, it expects uptick in execution and growth in top line as there are bright spots and opportunities in the global markets. Further, margins are expected to inch up as supply chains ease going forward.
Outlook
We retain our Buy rating on the stock with a revised PT of Rs. 45,000, as improving growth prospects across end-user industries, asset-light business model, strong parentage, and a healthy balance sheet justify the stock’s premium valuation.
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