Geojit's research report on Havells India
Havells India Ltd (HAVL) is a leading player in electrical consumer goods in India. Its key verticals include switchgears, cables & wires, lighting fixtures and consumer appliances. We downgrade HAVL to Reduce as we believe that near term earnings are likely to be more volatile, while valuation seem to be unsustainable unless until there is a sharp recovery, which is unlikely in the near term. Q1 Revenue & PAT declined by 45% & 64% YoY due to lockdown. EBITDA margin declined by 130bps YoY to 8.8%, on account of sub-optimal sales. Given frequent/continuing lockdowns, demand revival is expected to be protracted. We lower our EPS estimates by 7% for FY21E, as we factor the impact of Q1FY21E on our estimates. Though HAVL's long term strategy of expansion of product portfolio, strong brand recall and distribution strength will drive growth.
However, near term earnings volatility and premium valuation is a concern. We value HAVL at P/E of 37x on FY22E with a target price of Rs.530.
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