Buy Havells India; target of Rs 1545: LKP Research

LKP Research is bullish on Havells India has recommended buy rating on the stock with a target price of Rs 1545 in its research report dated July 21, 2023.

Broker Research

July 21, 2023 / 18:38 IST

Buy

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LKP Research's research report on Havells India

Havells revenue at Rs 48.2b (+14% YoY) stood marginally above estimate supported by betterthan-expected performance in Lloyds (+20% YoY) and cables and wires (+24% YoY), while, switchgears (+5% YoY), ECD (+5% YoY) & Lighting (-1% YoY) performance was marginally lower. Softening commodity prices although not fully reflected resulting in Gross margins of 30.4% (+140bps YoY). Advertising exp stood at Rs1.3b (2.8% vs 2.7% in 1QFY23; 2.3% in 4QFY23). EBITDA at Rs 4.02b (+11% YoY) stood below our estimate impacted by lower than estimated gross margins and higher than expected other expense (14.7% of sales vs exp. of 13.2%). EBITDA margin at 8.3% (-20bps YoY). EBIT margins for the Core Business stood at 13.5% (+60bps YoY) and for Lloyd stood at -4.7% vs -5.2% in 1QFY23. PAT at Rs 2.87b (+18% YoY). Management indicated that its core portfolio (Cables & Wires, Switchgear etc) to continue its growth propelled by strong momentum in construction and infrastructure industry. Fans adversely impacted in CY22 due to transition towards energy efficient fans, even as Lloyd continues to gain market share, establishing itself among top three players. It is expected to continue its growth trajectory as management remain focused.

Outlook

We believe the margin has hit a trough and will continue to improve from here on, given (1) softening commodity inflation; (2) an increase in the premium mix (fans: 30% vs 17% five years back) and lowering losses in Lloyd. We maintain BUY with a TP of Rs 1,545.

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