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Havells --------------------------------------------------------------------------- Maintain OUTPERFORM
Strong consumption trends drive domestic business; Sylvania turnaround on track
● Havells’s domestic earnings growth of 4%, although modest, was
ahead of our estimates. Higher-than-expected margins in the
lighting division was the reason for the beat.
● Apart from the strong growth in sales for both cables and lighting
products (25% YoY) , strength in consumer durables business
(55% YoY) was noteworthy. New product introduction(Geysers)
appear to be the key driver. We expect consumer business to
remain strong.
● Sylvania’s growth trajectory appears to be on track with margins
having expanded over 270 bp YoY. Adjusted PAT (factoring in
one off tax payments) at Rs129 mn was in line with estimates.
Key highlight was the 9% growth in top line in Euro terms as
against the management view of flat sales. As expected strength
in LATAM was the key driver.
● We remain confident of further margin expansion at Sylvania,
driven by benefits of prior cost actions and improving emerging
markets mix. Maintain OUTPERFORM.
Standalone EPS at Rs.4.9/share, up 4% QoQ
Havells declared 3Q FY11 EPS (standalone) of Rs.4.9, up 4% YoY.
Domestic sales remained strong and sales at Rs7.2 bn grew 22%YoY.
Cable & wires and lighting segment revenues increased by
about .25% YoY and entry into new products (e.g., geysers) drove
over 55% growth in sales for consumer durables segment. Switch
gears segment sales though remained flat YoY. We believe that
growth for consumer business of Havells should remain strong largely
due to its strong branding efforts and introduction of new products.
The market for such products also appears to be strong as highlighted
by management of Bajaj Electricals in its 3Q call this week.
On the margins front , we believe post the sharp decline over the past
three quarters, we expect 3Q margins to serve as the base case
margins in future. With margin declines behind us, we believe that
PAT growth for standalone business will start tracking sales growth.
Sylvania turnaround on track
Sylvania’s EBITDA margin expanded by 270 bp YoY to 5.3%, but was
marginally below our estimates. After adjusting for one-off tax
payments in Brazil, PAT at Rs129 mn was 59% up QoQ. European
sales increased for the first time in the past four quarters and strength
in LATAM business continued. We expect a further expansion in the
geographic scope for Sylvania. We understand that Sylvania has also
been recently launched in the Indian market . Our channel checks
also suggest that the European lighting market remains stable with
stable pricing trends.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Havells --------------------------------------------------------------------------- Maintain OUTPERFORM
Strong consumption trends drive domestic business; Sylvania turnaround on track
● Havells’s domestic earnings growth of 4%, although modest, was
ahead of our estimates. Higher-than-expected margins in the
lighting division was the reason for the beat.
● Apart from the strong growth in sales for both cables and lighting
products (25% YoY) , strength in consumer durables business
(55% YoY) was noteworthy. New product introduction(Geysers)
appear to be the key driver. We expect consumer business to
remain strong.
● Sylvania’s growth trajectory appears to be on track with margins
having expanded over 270 bp YoY. Adjusted PAT (factoring in
one off tax payments) at Rs129 mn was in line with estimates.
Key highlight was the 9% growth in top line in Euro terms as
against the management view of flat sales. As expected strength
in LATAM was the key driver.
● We remain confident of further margin expansion at Sylvania,
driven by benefits of prior cost actions and improving emerging
markets mix. Maintain OUTPERFORM.
Standalone EPS at Rs.4.9/share, up 4% QoQ
Havells declared 3Q FY11 EPS (standalone) of Rs.4.9, up 4% YoY.
Domestic sales remained strong and sales at Rs7.2 bn grew 22%YoY.
Cable & wires and lighting segment revenues increased by
about .25% YoY and entry into new products (e.g., geysers) drove
over 55% growth in sales for consumer durables segment. Switch
gears segment sales though remained flat YoY. We believe that
growth for consumer business of Havells should remain strong largely
due to its strong branding efforts and introduction of new products.
The market for such products also appears to be strong as highlighted
by management of Bajaj Electricals in its 3Q call this week.
On the margins front , we believe post the sharp decline over the past
three quarters, we expect 3Q margins to serve as the base case
margins in future. With margin declines behind us, we believe that
PAT growth for standalone business will start tracking sales growth.
Sylvania turnaround on track
Sylvania’s EBITDA margin expanded by 270 bp YoY to 5.3%, but was
marginally below our estimates. After adjusting for one-off tax
payments in Brazil, PAT at Rs129 mn was 59% up QoQ. European
sales increased for the first time in the past four quarters and strength
in LATAM business continued. We expect a further expansion in the
geographic scope for Sylvania. We understand that Sylvania has also
been recently launched in the Indian market . Our channel checks
also suggest that the European lighting market remains stable with
stable pricing trends.
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