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Snapshot
Havells India Ltd. is one of the largest electrical and power distribution
equipment manufacturer engaged in selling entire gamut of household,
commercial and industrial electrical devices.
Investment Rationale:
Sustainable growth drivers infused by the growth in rising
electrification, urbanization and shift to energy ‐ efficient: With the
economy bouncing back, urbanization continuing, changing social
structure ‐ increasing number of nuclear families, rising electrification
and shift to energy – efficient lighting will act as a catalyst for the
increase in demand for the products that Havells deals in. Over the last
five years, revenues have grown at a CAGR of 23.5% and we expect
similar growth to continue going forward.
Enhancing products portfolio & extensive distribution network: We
believe that electrical market is highly fragmented with stiff competition
from regional and national players. Thus, to beat the competition
Havells has created a strong presence in the pan India network with
4300 dealers which it continues to enhance by adding 500 dealers every
year going forward. As a result of this aggressive strategy, the company
was able to garner market share across most of its product segments.
Havells has rolled out exclusive brand outlets under the name “Havells
Galaxy”. We expect a strong brand equity and extensive distribution
network to help roll out its new consumer durables products going
f orward.
Sylvania turnaround to boost the consolidated revenues: Sylvania
worldwide (except North America, Australia and New Zealand), which
was acquired by Havells in April 2007. Sylvania was reporting negative
earnings till FY10. The company has broken‐even level in Q2FY11 at the
PBT level on back of restructuring and minimizing cost of operations.
We expect Sylvania to report positive PAT by the end of FY11. We
believe that sustained Sylvania earnings will boost the consolidated
revenues and an improvement in margins is expected to drive stock rerating
going forward.
Valuation & Recommendation
At CMP of Rs. 354, the stock is trading at a PE of 19.8x in FY11E and 12.7x in
FY12E whereas on EV/EBITDA it is trading at 10.5x and 7.5x in FY11E and
FY12E respectively. We believe that Havells is well – placed amongst its
peers on the given improvement in Sylvania, increased domestic
consumption and rising contribution by emerging markets. We recommend
to “BUY” the stock with a target price of Rs. 450 per share (PE of 16.2x in
FY12E), an upside of 27% for a long term view. Our target price is based on
16.2x FY12E P/E.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Snapshot
Havells India Ltd. is one of the largest electrical and power distribution
equipment manufacturer engaged in selling entire gamut of household,
commercial and industrial electrical devices.
Investment Rationale:
Sustainable growth drivers infused by the growth in rising
electrification, urbanization and shift to energy ‐ efficient: With the
economy bouncing back, urbanization continuing, changing social
structure ‐ increasing number of nuclear families, rising electrification
and shift to energy – efficient lighting will act as a catalyst for the
increase in demand for the products that Havells deals in. Over the last
five years, revenues have grown at a CAGR of 23.5% and we expect
similar growth to continue going forward.
Enhancing products portfolio & extensive distribution network: We
believe that electrical market is highly fragmented with stiff competition
from regional and national players. Thus, to beat the competition
Havells has created a strong presence in the pan India network with
4300 dealers which it continues to enhance by adding 500 dealers every
year going forward. As a result of this aggressive strategy, the company
was able to garner market share across most of its product segments.
Havells has rolled out exclusive brand outlets under the name “Havells
Galaxy”. We expect a strong brand equity and extensive distribution
network to help roll out its new consumer durables products going
f orward.
Sylvania turnaround to boost the consolidated revenues: Sylvania
worldwide (except North America, Australia and New Zealand), which
was acquired by Havells in April 2007. Sylvania was reporting negative
earnings till FY10. The company has broken‐even level in Q2FY11 at the
PBT level on back of restructuring and minimizing cost of operations.
We expect Sylvania to report positive PAT by the end of FY11. We
believe that sustained Sylvania earnings will boost the consolidated
revenues and an improvement in margins is expected to drive stock rerating
going forward.
Valuation & Recommendation
At CMP of Rs. 354, the stock is trading at a PE of 19.8x in FY11E and 12.7x in
FY12E whereas on EV/EBITDA it is trading at 10.5x and 7.5x in FY11E and
FY12E respectively. We believe that Havells is well – placed amongst its
peers on the given improvement in Sylvania, increased domestic
consumption and rising contribution by emerging markets. We recommend
to “BUY” the stock with a target price of Rs. 450 per share (PE of 16.2x in
FY12E), an upside of 27% for a long term view. Our target price is based on
16.2x FY12E P/E.
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