Hold Havells India; target of Rs 700: Prabhudas Lilladher

Prabhudas Lilladher's research report on Havells India

We increase FY21/FY22/FY23 estimates by 29.6%/ 13.8%/ 12.3% and upgrade the stock from Reduce to Hold given 1) resilient demand recovery in consumer & residential segments 2) strong performance in ECD with market share gains 3) likely gains in Lloyd AC with government’s Atma-nirbhar drive HAVL’s consumer & residential segment (75% of sales) is showing strong momentum by growing in mid-teens with market share gains even as B2B segment is also showing signs of a steady recovery. Lloyd AC is benefitting from a low base and reduced dependence on imports due to its in-house manufacturing which would further benefit from Govt’s thrust on atmanirbhar initiative in Room AC. We expect HAVL’s to retain some benefits from its cost savings measures and expect margins to expand by 280bps to 13.7% over FY20-23. We estimate 18.4% PAT CAGR over FY20-23.

Outlook

We assign a target price of Rs700 @36xFY23 EPS (earlier 33xFY23EPS). Upgrade to HOLD. Extent of cost control and Lloyd Refrigerator success are key monitorables.