Dolat Capital's research report on Havells India
Q1 was a weak quarter as expected with revenue decline of 45% at Rs13.8bn, with decline in the range of 40-53% across segments. While EBIDTA was down 53%. Margins were helped by lower costs, especially in ad expenses, which enabled Havells to end at 9% margins. Working capital pressure was seen with WC days going up to 48 days and it has availed Rs 8.7bn of credit line in the quarter and net cash has declined to Rs8.4bn vs Rs10bn in March-q. TTM RoEs have declined to 14.8%, down 420bps While summer products have lost the season in FY21, Havells also has challenges in its cables, wires and switches, which are longer recovery cycle products incumbent on recovery in infra and real estate.
Outlook
Given the recent run up in the stock, there is still a 10% downside, even when we value it at 40x, and hence we move our rating to Sell.
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