Visit http://indiaer.blogspot.com/ for complete details �� ��Havells :
Q2 beat on Sylvania turnaround
�� Subsidiaries help cover up tad weaker standalone PAT
Havells reported consolidated net profit of Rs705.2mn in Q2FY11, which is 10%
higher than our estimate of Rs639mn. Standalone profit at Rs579mn grew 6.7%
y-o-y and is 6% below estimate owing to weak growth of industrial switchgear.
Key positives of the quarter are (1) turnaround of Sylvania (2) expansion in
EBITDA margin of parent co q-o-q by 80bp; and (3) sustained 20% to 30% in
consumer products in India.
Sylvania ahead of estimate on strong LatAm/Asia demand
Turnaround of Sylvania at net level compared to huge losses in FY10 and our
expectation of loss continuing till FY13e is a huge positive. The turnaround is
thanks to 45% y-o-y sales growth in non European market. In Q2FY11 non
European market contributed to 40% of revenue of Sylvania compared to 31% in
Q2FY10. Europe revenue declined 3% thus restricting total growth to 12%.
Domestic consumer electrical growth sustaining at 20%+
Biggest positive of Havells is its presence in the fast growing electrical consumer
market of India. In Q2FY11 consumer products yet again grew at strong pace with
fans growing by 30%, lighting growing by 23% and domestic switch gear growing
by 23%. However slowdown in industrial goods segment contributing to about
20% of revenue restricted total revenue growth in India unit to 16%.
New products and Sylvania to drive stronger growth – Buy
We expect Havells to have stronger profit growth in FY12e owing to launch of new
consumer products in India and further rise in profitability and revenue of Sylvania
which now contribute 50% of consolidated sales. Our PO is at PE of 17x FY12e.
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