Religare's research report on HavellsHAVL’s Q3FY16 results were broadly in line with estimates (sales/PAT: +8%/+4% to Rs 13.4bn/Rs 1.2bn). While HAVL is a well-managed business and has consistently delivered on cash flows, ROCE and growth metrics, its current valuations (PE of 34/29 for FY17E/FY18E) are expensive. Further, given the low capital requirement of the business, future capital allocation decisions would remain critical for valuations. We downgrade the stock to SELL (from HOLD) while maintaining our Mar’17 TP of Rs 260.HAVL has received a consideration of €148.8mn from the sale of 80% stake in Havells Malta and Havells Exim; of this, Rs 8.75bn has been repatriated to the parent. The company has retained €18mn overseas for meeting contingencies from Latin America. Management has ruled out any change in dividend policy (40-50% payout) ahead. Given the low capital requirement of the business, future capital allocation decision would be critical for valuations.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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