Hold Havells India; target of Rs 259: ICICIdirect

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26 Aug, 2025 12:21

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ICICIdirect's report on Havells IndiaHavells India reported muted Q2FY16 standalone numbers. Revenues declined 1% to Rs 1349.8 crore (vs. I-direct estimate: Rs 1402 crore) on the back of a 5% decline in cable segment & flat revenues in the switchgear, lighting & fixtures segment. However, the ECD segment witnessed moderate 6% revenue growthThough industrial cables registered 16% volume growth, aggressive price cuts on the back of a commodity price decline resulted in muted sales growth. LED lighting sales jumped 88% due to a significant shift from CFL lightsThe EBITDA margin witnessed an improvement of 40 bps to 13.8% (vs. I-direct estimate of 12.8%) mainly due to benefit from raw material price decline & lower A&P spend during the quarter. Net profit was at Rs 120.7 crore (vs. I-direct estimate of Rs 121.9 crore)During the period, the performance of Sylvania remained muted with a decline in sales by ~11.7% YoY to €100.7 million. However, EBITDA margins contracted by 90 bps to 3.9% mainly affected by lower sales. The company recorded a net loss of €3.7 million against a loss of €1.1 million recorded during Q2FY15Outlook and valuationWith the strong balance sheet and lower capex requirement (no major capex plan in the near term), we believe Havells’ standalone business will generate strong cash flows in FY14-17E. We have modelled standalone revenue CAGR of ~12% for FY14-17E and EBITDA margin of ~13.5- 13.6% for FY15E-17E. Further, the standalone EPS of the company is expected to grow at a CAGR of ~10% in FY14-17E. Considering the slow pick-up in demand of industrial products in the domestic market and steady performance from the LatAm division of Sylvania, we have modelled consolidated revenue CAGR of ~7% in FY15-17E and EBITDA margin expansion of ~210 bps during the same period. At the CMP, the stock is trading at a PE multiple of 31.6x FY16E and 24.6x FY17E. We have used sum of the parts (SOTP) method to value HIL’s standalone business at 25x FY17 EPS and Sylvania’s business at 5x FY17 EV/EBITDA and arrived at a target price of Rs 259. We believe Sylvania will participate efficiently to reduce the consolidated debt burden of the company by FY17E, thus reducing the overall interest burden, says ICICIdirect research report.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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