Motilal Oswal's research report on Havells India
HAVL’s 3QFY15 revenue growth declined meaningfully from 18.7% YoY in 1HFY15 to 5.3% (in-line), impacted by a slowdown in consumption demand and also slackness in industrial activities (impacting growth in cables and switchgears; industrial products contribute ~25% to standalone revenue).
EBITDA margin stood at 14.3% in 3QFY15 v/s 13.2% YoY (est. of 12.9%), aided by several factors: i) mix effect - higher revenue from Wires (+6%, v/s cables at +1%), LED products (+63%), ii) increased share of in-house manufacturing for lighting fixtures and iii) ad expenses curtailed at 2.6% of revenue v/s 3.5% QoQ / 2.9% YoY etc. In 1HFY15, HAVL had increased the ad expenses to 3.5% v/s 2.4% in FY14 as a strategy to support the next leg of growth. Thus, the cut possibly indicates management’s expectations of a more prolonged slowdown.
"Maintain Neutral with a target price of INR285 (24x FY17E standalone and 8x EV/EBITDA for Sylvania)", says Motilal Oswal research report.
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