ICICI Direct recommended hold rating on Havells India with a target price of Rs 640 in its research report dated January 23, 2020.
ICICI Direct's research report on Havells India
Havells’ performance was marred by industrial products (~30% of total revenue) and Lloyd segment in Q3FY20. Cable and switchgear segments de-grew ~13% and ~6%, respectively, mainly on account of sluggish government spending on infrastructure & industrial activities. Lighting business, on the other hand, also reported a sharp fall in revenue by 18% YoY due to price correction and subdued demand of professional luminaires. Consumer facing businesses such as ECD and Lloyd faced low inventory build-up at dealers’ level due to liquidity issues. Under Lloyd, while the AC business remained flat YoY, the LED panel business recorded a sharp price correction due to lower demand and intense competition. The management reiterated a further improvement in EBITDA margin (visible on a QoQ basis in Q3FY20) in FY21E with a recovery in demand of Lloyd business coupled with improved government spending.
While Havells’ industrial products and Lloyd business was largely impacted by a slowdown in government capex and lower offtake by dealers, EBITDA margins improved on better product mix and cost rationalisation initiatives. We roll over our valuation on FY22E, valuing the stock at 35xFY22E earnings. We maintain our HOLD rating with a revised target price of Rs 640/share.
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