Sharekhan's research report on Honeywell Automation India
Profitability was stressed in Q1FY24 due to high raw material costs and other expenses, despite strong growth of ~19% y-o-y in sales. Operating profit dipped by 1.1% y-o-y to Rs 121 crore (versus our estimate of Rs. 144 crore). OPM fell to 12.9% (down 257 bps y-o-y). Net profit grew by 1.4% y-o-y to ~Rs. 103 crore. Order backlog as of FY2023-end was Rs. 3,448 crore (up 17% y-o-y). Exports mix in total revenue is at 41%. As per the annual report, Honeywell expects opportunities from the energy & infrastructure sectors. Margins are expected to expand as chip shortage and supply chain issues are easing gradually.
Outlook
We retain a Buy rating on Honeywell Automation with a revised PT of Rs. 48,000, as improving growth prospects in clean energy and automation industry; asset-light business model, strong parentage and healthy cash flows justify the stock’s premium valuation.
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