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Havells India - Q2FY21 Result Update - ICICI Securities

Posted On: 2020-10-30 08:32:55

Havells' consumer facing business (~75% of sales) saw solid growth of 15% YoY in Q2FY21 post easing of lockdown restrictions but performance of industrial/institutions segments (~25% of sales) faced challenges due to slow business recovery. Key highlights of conference call were: 1) Performance of consumer facing business likely to be strong supported by festive demand, low channel inventory, 2) institution business growth to be driven by improved government, private capex, 3) supply chain disruptions led market share gains for Havells, 4) Lloyds business may improve. It aims to regain lost market share, 5) backward integration to help improve margin of Lloyd business, 6) Rs. 330 crore of capex for FY21E, 7) EBITDA margin expected to normalise, going forward, with restoration of advertisement, some other costs. We believe streamlining of Lloyd distribution network, control over supply chain (start of new plants reduced dependency), improved product positioning and launch of new product category (refrigerators) will drive sales of consumer facing business. We revise our revenue, earning estimates upward for FY21, FY23E, introduce FY23 estimates. We model revenue, earning CAGR of 13%, 20%, respectively, in FY20-23E led by strong demand of consumer facing business.

Valuation & Outlook

Strong performance of consumer facing business is likely to continue amid good festive demand, market share gains. We revise our FY21E, FY22E earnings estimate upward by 76%, 14%, respectively, and introduce FY23E estimates with revenue, earning CAGR of 13%, 20%, respectively, for FY20-23E. We roll over our valuation on FY23E, value the company at 41x FY23E earnings. We upgrade from HOLD to BUY rating with revised TP of Rs. 835.

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Shares of HAVELLS INDIA LTD. was last trading in BSE at Rs.729 as compared to the previous close of Rs. 725.05. The total number of shares traded during the day was 102699 in over 3200 trades.

The stock hit an intraday high of Rs. 740.65 and intraday low of 712. The net turnover during the day was Rs. 74542292.

Source: Equity Bulls

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