Hold Havells India; target of Rs 260: Religare

Religare's report on Havells India

"HAVL's Q2FY15 standalone PAT at Rs 1.18bn came in lower than estimates on softer EBITDA margins. Sales growth of 16% YoY was led by continued traction in cable/consumer durables. EBITDA margins slid 120bps YoY to 13.2% on higher advertisement/sales promotion expenses and consulting charges (Rs 50mn) paid during the quarter. Sylvania reported 5% revenue growth aided by 9% growth in Europe, but with concerns over sustainability. Management maintained its domestic/Sylvania guidance."

"We roll over to a Dec'15 TP of Rs 260 (from a Sep'15 TP of Rs 240), valuing the standalone business at Rs 235 (22x target multiple) and Sylvania at Rs 25 (10x). While we expect 16% revenue growth CAGR over FY14-FY17E, PAT CAGR is expected to remain soft at 12% due to an increase in the marginal tax rate. Hold the stock for target price of Rs 260", says Religare Capital research report.

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