HAVELLS
10123456789,101234567899012345678920123456789.7012345678900123456789
-9.65 (-0.80%)
NSE Volume
3.5L+
Broker Reports
ACCUMULATE
ACCUMULATE
NEUTRAL
BUY
ACCUMULATE
ADD
REDUCE
ADD
NEUTRAL
BUY
ACCUMULATE
BUY
HOLD
REDUCE
HOLD
REDUCE
Weakness to persist... 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 suboptimal 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.
ADD
Havells' clocked 20% revenue dip in 4QFY20 due to high revenue contribution from the last 12-15 days of March (~25% mix). However, co was witnessing strong recovery with ~9% growth for the quarter (ex-Covid) after posting weak show in 9MFY20 (-1% in 9MFY20 and -10% in 3QFY20). Lloyd recovery preCovid was strong led by various initiatives taken by the company. Besides, Havells has managed its cost very effectively and posted strong 11% EBITDA margin. With pressure led by negative oplev, most appliances companies will face pressure on sustaining margins. Additionally, the co is well positioned in terms of its working capital to ride out the disruption caused by Covid-19. Our expectation of a recovery by Havells, albeit delayed, remains intact. However, due to the loss of sales of summer products and weak demand environment, we cut our EPS estimates by 8-9% for FY21/FY22 (28/23% cut in our 4QFY20 preview). We value Havells at 36x on Mar-22E EPS, and derive a TP of Rs 515. Maintain ADD.
BUY
We cut our revenue, earnings estimates for FY21E due to extended lockdown. We expect Havells, as a strong brand in FMEG category, to benefit from its backward integration (strong supply chain, pan-India distribution) & strong balance sheet position as and when business returns to normal. We maintain BUY rating on the stock and target price of Rs 575.
ACCUMULATE
Havells India (HIL) reported 20% YoY decline in revenue at Rs22.1bn, 9%/14% below our/consensus estimates, owing to de-growth across all the segments impacted by COVID-19 lockdown. Performance in January-February 2020 was decent and ex-COVID HIL would have grown by 9% YoY in 4QFY20 as per the management. ECD segment revenue fell 14% YoY to Rs4.6bn while Cables revenue declined 24% YoY to Rs6.8bn. Lighting and Switchgears revenue declined 31%/14% YoY to Rs2.6bn/Rs3.5bn, respectively, owing to slowdown in real estate and infrastructure sectors which further worsened post COVID-19. Lloyd fell 14% YoY to Rs4.6bn due to loss of sales of ACs in March. Gross margin fell 70bps YoY to 36.2% due to product mix and lack of operating leverage. EBITDA fell 22% YoY to Rs2.4bn, leading to 30bps YoY decline in EBITDA margin to 11.1%, in line with estimates. The decline in EBITDA margin was restricted by 69% YoY drop in ad-spends (1.5% of sales vs. 3.7% YoY). Higher depreciation (up 59% YoY due to commissioning of Lloyd factory and IndAS116 changes) and lower other income (down 37% YoY) led to 34% YoY fall in PBT to Rs1.9bn. However, lower tax rate at 10.4% (vs. 33.3% YoY) restricted decline in PAT to 12% YoY at Rs1.8bn, 2%/11% below our/consensus estimates. We have revised down our estimates to factor in the impact of COVID-19 crisis and cut the target price to Rs510 (from Rs630 earlier) based on 40x FY22E earnings. The stock is trading at optimal valuation and hence we downgrade our rating to Accumulate from Buy earlier.
REDUCE
We cut HAVL’s FY21/FY22 EPS by 13% and 7% given Covid-19 led disruption in demand especially in summer season products (Room AC, Air coolers) and longer recovery cycle in industrial products (industrial cables & switchgears, professional luminaries). We expect demand for HAVL’s consumer portfolio to bounce back faster led by ECD segment, however B2B segments will remain a near term drag. Slump in switchgears and cables is likely to get stretched given that economic stress and WFH in services sector can deepen slowdown in both residential and commercial real estate. We expect sharp decline in sales and profits in 1Q and gradual recovery building in from 3Q21. We estimate 14.7% PAT CAGR over FY20-22. Maintain Reduce rating with a target price of Rs.485 (33x FY22 EPS).
HOLD
We expect the current demand headwinds to continue in the near term considering the subdued construction sector and general weakness con- sumer segment. However, we believe that near term concerns has already factored in the stock price. Considering this we maintain our valuation at 38x as we roll forward to FY22E. We upgrade HAVL to Hold with a target price of Rs.666.
BUY
Havells reported another let down. Co has been challenged by (1) Slowdown (real estate, industrial and govt projects), (2) Liquidity issue leading to low trade inventory and (3) WIP in Lloyd. We believe earnings upcycle will begin from 4QFY20 onwards led by favourable base, channel filling opportunity and gradual recovery in demand. We cut our EPS by ~6% for FY20-22 to factor slower recovery. We value Havells at 36x on Dec- 21 EPS, our TP is of Rs 710. Maintain BUY.
NEUTRAL
We forecast moderate revenue CAGR of 13.5% over FY20-22. The base becomes favorable for double-digit growth and normalization of dealer inventory should aid growth in the core portfolio. From near-term perspective, Lloyd’s performance is a key monitorable as Havells can ill-afford another white-washed summer season. It already has higher inventory than peers and needs to arrest market share loss in the AC business. A re-look at the pricing strategy is a right step in this direction. Our EPS CAGR is estimated at 15.9% over FY20-22E as we cut FY21/FY22E EPS by 6%/8%. On the back of our EPS cut, our TP is reduced to INR660 (prior: INR710) with an unchanged target Sep’21E P/E multiple of 40x. Maintain Neutral.
HOLD
We continue to like the business model of Havells, which is largely distribution-centric. With Lloyds in the portfolio, we believe HAVL will continue to go for increasing its share in household spending. Looking ahead, the Company will continue to expand its geographic reach as well as product offerings. We see HAVL as one of the pure plays on likely up-tick in discretionary spend over the medium-term. Rolling over our estimates to FY22E, we continue to remain optimistic on Havells’ growth potential on the back of low penetration, increasing urbanisation and rising middle class. However, with limited upside from the current level, we maintain our HOLD recommendation on the stock with a revised Target Price of Rs624 (from Rs640 earlier), valuing it at 36x FY22E earnings.
HOLD
While Havells’ industrial products and Lloyd business was largely impacted by a slowdown in government capex and lower offtake by dealers, EBITDA margins improved on better product mix and cost rationalisation initiatives. We roll over our valuation on FY22E, valuing the stock at 35xFY22E earnings. We maintain our HOLD rating with a revised target price of Rs 640/share.
REDUCE
We cut HAVL’s FY21/FY22 EPS by 4.2%/5.4% given muted growth expectations in 1) B2B sales (industrial cables & switchgears, professional luminaries) 2) pricing disruption in Lighting and 3) poor visibility in Lloyd. Lloyd LED TV offers bleak chances of a comeback and planned entry into highly competitive Refrigerator segment (1Q21) can further pressurize profitability, unless there is meaningful pickup in RAC in upcoming summer season. We believe HAVL’s lighting margins will remain under pressure while switchgear growth will suffer in near term due to slowdown in real estate. HAVL has undertaken cost cutting and manpower rationalization, pickup in growth holds key to our margin expansion estimates of 80bps over FY20-22. We estimate 17.5% PAT CAGR over FY20-22 on a low base (1.8% decline in in FY20). Maintain Reduce rating with a target price of Rs.567 (33x FY22 EPS). Sharp recovery in urban demand and significant market share gains in Lloyd is a key risk to our call.
REDUCE
HAVL is trading at average 1 year forward P/E of 46x, which is 18% premi- um to its 5 year historical average. Given the near term demand headwinds and premium valuation, we value HAVL at 38x on FY21E and reiterate to Reduce with a target price of Rs625.
ACCUMULATE
Havells India (HIL) reported only 2% YoY revenue growth at Rs22.3bn in 2QFY20, 4%/6% below our/consensus estimates. The demand was affected by continued slowdown in real estate, industrial and infrastructure sectors. Revenue of the Electrical Consumer Durables (ECD) segment was up 15% YoY at Rs5.5bn while Cables revenue was up 7% YoY at Rs8.2bn. Lighting revenue remained flat YoY at Rs2.8bn while Switchgears revenue fell by 1% YoY to Rs4bn. Lloyd sales declined by 30% YoY to Rs1.8bn as it suffered from loss of sales in LED TV due to pricing pressure amid high competitive intensity. Gross margin was up 80bps YoY to 39.1%. EBITDA margin contracted by 150bps YoY to 10.5%, below our/consensus estimate of 11.4%/11.9%. EBITDA fell by 11% YoY to Rs2.3bn. However, PAT remained flat YoY at Rs1.8bn, aided by lower tax rate at 11.6%. PAT was in line with our estimate but 10% below consensus. We cut our earnings estimates by 13%/11%/7% for FY20E/FY21E/FY22E, respectively. We maintain Accumulate rating on HIL with a revised target price of Rs700 (from Rs770 earlier) based on 40x September 2021E earnings.
BUY
Havells reported another let down. Co has been challenged by slowdown (real estate, industrial and govt projects) and impact from rejigging Lloyd’s strategy. We believe earnings growth trajectory has bottomed out and expect partial recovery in 2HFY20 and full recovery from 1QFY21 onwards. We cut our EPS by 9/4/4% in FY20/21/22 and value Havells at 36x on Sep-21E EPS, with of TP of Rs 739. Maintain BUY.
BUY
BUY
With a relative weak 1HFY20 in the switchgear, Lloyds and lighting & fixtures business resulting from slowdown in realty and industrial space we have factored a reduced topline growth of 12-15% for FY20-21 compared to previous estimate of 18-20% for the same. We see the ECD to continue to perform well with improvement in private consumption due to festive season coming up and government initiatives to improve liquidity overall. With the full ramp up of Lloyd business including launch of washing machines from the new plant in FY21 we are likely to see major growth in FY21. The overall growth story for the company remains with CAGR earnings growth of ~29% over FY19-21E. We reduce our Revenue / EBITDA / PAT estimates by 4-6% for FY20-21 with a reduced TP of `750 P/E 36x FY21E and maintain our BUY.
HOLD
While Havells’ industrial product business was impacted by a slowdown in capex, the consumer facing business witnessed pressure on the pricing front, resulting in lower EBITDA margin. We maintain our target price and HOLD rating on the stock considering Havell’s strong balance sheet.
REDUCE
Lloyd’s LED TV plans already gone haywire with aggressive entry of Xiaomi,planned foray in highly competitive Refrigerator segment next year can further pressurize profitability. HAVL is launching innovative products and entering new ECD categories (water purifiers, kitchen appliances, personal grooming), sustaining 20%+ growth and market share would be a daunting task in rising competitive scenario. We believe lighting margins will remain under pressure while switchgear growth will suffer in near term due to slowdown in real estate. We estimate 13.3% PAT CAGR over FY19-22 and value the stock at 33x Dec21 EPS of Rs 17.6. Maintain Reduce rating with a target price of Rs580. Sharp recovery in consumer demand and significant market share gains in Lloyd is a key risk to our call.
BUY
Havells continues to be a virtual debt-free company since last 4-5 years which shows it strong operational efficiency with a cash conversion cycle of 27-28 days, enabling it to have an average RoE and RoCE of 25% and 26% respectively since last 5 years. Even though its dividend pay-out remains poor at 40-50%, it makes up for it in the value to its shareholder by value accretion enabled by high asset turnover of 6-7x since last five years enabled by strong dealership network, use of technology and R&D for future smart products leading to strong brand recall along with strong demographic demand make it a long-term value BUYwith TP of R 784 (P/E 38x FY21E, Revenue CAGR of 19% FY19-21E).
REDUCE
HAVL which got re-rated post sale of Sylvania and Lloyd acquisition currently trades at 47.7x12 month forward PE which is at a premium of 15% to 5-year average. We value the stock at 33xSept21 EPS and arrive at a target price of Rs566. Sharp recovery in consumer demand and significant gains in Lloyd is a key risk to our call. We initiate coverage with Reduce rating.
HOLD
We believe Havells’ Lloyd business is in a transition phase with high investment in people, technology and branding. This, coupled with pricing pressure in the air conditioner business (due to significant competition from MNCs) would likely weigh on overall EBTIDA margin of the company in the near term. We maintain our HOLD rating on the stock and revise our target price lower to Rs 725.
ACCUMULATE
Havells India (HIL) posted 5% YoY growth in net revenue at Rs27.1bn in 1QFY20, 5% below our estimate, as demand was affected by real estate slowdown, liquidity crunch and delay in projects post election. Growth was driven by Electrical Consumer Durables (ECD), up 24% YoY at Rs6.2bn and Lighting (including EESL), up 9% YoY at Rs2.8bn. Switchgear revenue remained flat YoY at Rs3.8bn, while Cables grew by only 4% YoY at Rs7.8bn. Lloyd sales declined by 8% YoY to Rs6.5bn despite 1QFY20 being a strong summer season. Gross margin was down 20bps YoY at 37.4%. EBITDA margin contracted by 180bps YoY to 10.2% (lowest in past seven quarters), below our/consensus estimate of 12% each. EBITDA fell 12% YoY to Rs2.8bn, while PAT declined by 17% YoY to Rs1.7bn, below our/consensus estimate of Rs2.3bn each. We cut our earnings estimates for FY20/FY21 by 9%/5%, respectively. We maintain Accumulate rating on HIL with a revised target price of Rs690 (from Rs725 earlier) based on 40x FY21E earnings.
BUY
HOLD
We continue to like the business model of Havells, which is largely distribution-centric. With Lloyds in the portfolio, we believe the Company will continue to go for increasing its share in household spending. Looking ahead, it will continue to expand its geographic reach as well as product offerings. We see Havells as one of the pure plays on likely up-tick in discretionary spend over the medium-term. However, due to limited upside potential from the current level we downgrade our recommendation on the stock to HOLD from BUY with a Target Price of Rs792, valuing it at 38x of FY21 earnings.
HOLD
Havells, a strong brand in the ECD segment, faced challenges in the Lloyd business where margin remained subdued due to bad weather and high competition. This would weigh on overall EBITDA margins, going forward, which would likely remain lower compared to its five year historical EBITDA margin. Despite being on a strong footing, we believe that at the current market price the stock discounts all near term positives. We downgrade our rating from BUY to HOLD and maintain our target price at Rs 800.
HOLD
BUY
REDUCE
NEUTRAL
HOLD
BUY
BUY
BUY
BUY
BUY
BUY
REDUCE
ACCUMULATE
BUY
ACCUMULATE
BUY
BUY
BUY
BUY
BUY
BUY
SELL
BUY
BUY
BUY
BUY
BUY
BUY
BUY
SELL
BUY
BUY
HOLD
SELL
ACCUMULATE
BUY
BUY
ACCUMULATE
BUY
BUY
BUY
ACCUMULATE
SELL
SELL
HOLD
BUY
NEUTRAL
HOLD
BUY
BUY
BUY
BUY
NEUTRAL
BUY
BUY
NEUTRAL
BUY
BUY
BUY
BUY
BUY
BUY
HOLD
SELL
REDUCE
About
Havells India Ltd.
NSE: HAVELLS | BSE: 517354 | ISIN: INE176B01034 | Sector: Electric Equipment
Create your account on Frontpage
Join 2,00,000 Indian traders and discuss trades, strategies, news & views on any stock.