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Havells India (HAVL)
Others
Sylvania disappoints. Havells reported consolidated 3QFY11 EBITDA (+14% yoy, -
12% qoq) at Rs1.15 bn vs our estimates at Rs1.31 bn. After adjusting for one-off
expense of Euro2.4 mn (tax payment made in Brazil for previous years), the
consolidated numbers are in line. The lower-than-estimated profitability at Sylvania has
been cushioned by the domestic business. We retain our ADD rating with a DCF-based
target price of Rs425.
Key highlights
�� Sylvania disappoints. Even after adjusting for one-off expense of Euro2.4 mn for tax payments
made in Brazil for the previous years, EBIDTA margin in 3QFY11 came at 5.3% vs our estimates
at 7.2%. In the 2QFY11 conference call, the management had indicated the exit rate of EBITDA
margins in 2QFY11 at 8.2% (for September). Lower-than-estimated margin is a clear
disappointment as the likely turnaround in Sylvania is a major driver of earnings in the near
future. We would need to understand the reasons for the same in the conference call on
Monday.
�� Domestic business performed well. Domestic business cushioned the underperformance of
Sylvania. The standalone EBITDA for 3QFY11 came at Rs914 mn (+14% yoy, +9% qoq) vs our
estimates at Rs812mn. The major part of outperformance was driven by unallocable expenses
coming lower than our estimates (Rs595 mn vs our estimates at Rs650 mn).
�� Euro9 mn of fresh equity infusion has been done by the parent company into Sylvania. We
expected Sylvania to be self-sufficient for future capital requirements from 2QFY11 onwards.
�� Storage water heaters generated turnover of Rs164 mn in 3QFY11 which was the first full
quarter after the launch in September 2010. Considering that the total market size for electrical
water heaters in India is ~Rs4.5 bn (FY2010 estimate), a market share of 3.6% in the first
quarter is a good achievement and augurs well for future growth in the category.
We retain our ADD rating with a target price of Rs425
We retain our earning estimates and ADD rating with a target price of Rs425. We would take a
relook at our earning estimates post the conference call scheduled for Monday.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Havells India (HAVL)
Others
Sylvania disappoints. Havells reported consolidated 3QFY11 EBITDA (+14% yoy, -
12% qoq) at Rs1.15 bn vs our estimates at Rs1.31 bn. After adjusting for one-off
expense of Euro2.4 mn (tax payment made in Brazil for previous years), the
consolidated numbers are in line. The lower-than-estimated profitability at Sylvania has
been cushioned by the domestic business. We retain our ADD rating with a DCF-based
target price of Rs425.
Key highlights
�� Sylvania disappoints. Even after adjusting for one-off expense of Euro2.4 mn for tax payments
made in Brazil for the previous years, EBIDTA margin in 3QFY11 came at 5.3% vs our estimates
at 7.2%. In the 2QFY11 conference call, the management had indicated the exit rate of EBITDA
margins in 2QFY11 at 8.2% (for September). Lower-than-estimated margin is a clear
disappointment as the likely turnaround in Sylvania is a major driver of earnings in the near
future. We would need to understand the reasons for the same in the conference call on
Monday.
�� Domestic business performed well. Domestic business cushioned the underperformance of
Sylvania. The standalone EBITDA for 3QFY11 came at Rs914 mn (+14% yoy, +9% qoq) vs our
estimates at Rs812mn. The major part of outperformance was driven by unallocable expenses
coming lower than our estimates (Rs595 mn vs our estimates at Rs650 mn).
�� Euro9 mn of fresh equity infusion has been done by the parent company into Sylvania. We
expected Sylvania to be self-sufficient for future capital requirements from 2QFY11 onwards.
�� Storage water heaters generated turnover of Rs164 mn in 3QFY11 which was the first full
quarter after the launch in September 2010. Considering that the total market size for electrical
water heaters in India is ~Rs4.5 bn (FY2010 estimate), a market share of 3.6% in the first
quarter is a good achievement and augurs well for future growth in the category.
We retain our ADD rating with a target price of Rs425
We retain our earning estimates and ADD rating with a target price of Rs425. We would take a
relook at our earning estimates post the conference call scheduled for Monday.
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