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Havells India - Q1 FY22 first cut - YES Securities

Posted On: 2021-07-22 07:10:18 (Time Zone: UTC)

Inline revenues, while margins continue to surprise positively; expect consensus earnings upgrades reinforcing our positive view

- Result summary - HAVL continued with its strong performance with revenues coming in line with the estimates with EBITDA surpassing estimates. Revenue/EBITDA/PAT delivered growth of 76%/170%/173% beating estimates by 0%/13%/9% respectively. This is the third consecutive quarter of better than expected profitability.

- Topline - Revenue grew 76% yoy to Rs 25.9bn led by strong growth across the segments. ECD continues to deliver strong performance with growth of 91%, while Switchgears/Wires and Cables/Lighting & Fixtures/Others delivered growth of 96%/75%/52%/68% respectively. Lloyd mainly consisting of RAC grew 62%. Strong growth is on back of favourable base.

- Margins - Gross margins surprisingly expanded 99bps yoy to 35.7% while on sequential basis it has declined 176bps. EBITDA margin expanded 474bps to 13.6% as company has controlled its expenses well. HAVL has been best at maintaining profitability despite strong commodity inflation.

- Lloyd - Lloyd registered 62% growth, however EBIT margins stood at 2.1% impacted by under absorption of fixed expenses due to lower production volumes.

- PAT - EBITDA growth was very strong at 170%, PAT growth at 173% on account of higher other income and lower interest expense.

- Near-term outlook - Demand scenario remains resilient though there are local disruptions owing to lockdowns or scattered market timings. Now with covid situation being under control and opening of markets in most parts of the country, we expect growth momentum to accelerate from upcoming festive season.

- Our view - After the recent outperformance, the stock is currently trading at valuations of 52x FY23E P/E and 36x EV/EBITDA. Better than expected Q1 performance should drive more upside from current levels. We expect stock to continue trading at premium valuations given it has been able to surpass expectation for 3 quarters in a row and has been able to manage its profitability much better than peers. We continue to remain positive on stock after our recent upgrade to BUY with TP of Rs1,237.

Shares of HAVELLS INDIA LTD. was last trading in BSE at Rs. 1103.4 as compared to the previous close of Rs. 1088.35. The total number of shares traded during the day was 140804 in over 6007 trades.

The stock hit an intraday high of Rs. 1108.95 and intraday low of 1061.6. The net turnover during the day was Rs. 153270352.

Source: Equity Bulls

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