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Snapshot of Quarterly Results
The company reported a Net Sales for Q1FY12 increased by 16.1% to
Rs. 799.95 crs YoY due to the good growth recorded in the cables
(25.7% YoY growth) and Lighting & Fixtures (20.7% YoY growth).
EBITDA increased by 10.3% to Rs. 88.41 crores in Q1FY12 YoY. The
Company reported an EBITDA margin of 11.1% in Q1FY12, fall of
50bps because of higher advertisement expenses and significant
growth in input costs.
Net Profit for Q1FY12 went up by 7.8% to Rs. 57.5 crores YoY. Havells
reported a PAT margin of 7.2% in Q1FY12, contraction of 50 bps. The
margins were under pressure owing to increased depreciation and
interest cost because of higher working capital requirement.
Sylvania: Sylvania reported mere 1.4% YoY revenue growth to €106.7mn
in Q1FY12 as compared to €105.4 with Europe declining 3% YoY to
€64mn due to seasonality in business. But, LATAM and Asia reported YoY
healthy growth at 8.1% and 20.7% respectively. EBIDTA grew by 36.8%
YoY to €7.8mn in Q1FY12 as compared to €5.7mn in Q1FY11 due to the
better product mix and improved pricing. EBIDTA margin stood at 7.3%
in Q1FY12, a jump of 190 bps YoY from 5.4% in Q1FY11. Sylvania
reported Adjusted PAT at €2.4mn for Q1FY12 as against loss of €0.2 mn
in Q1FY11.
Valuation & Recommendation
At CMP of Rs. 360, the stock is trading at a PE of 12.9x in FY12E and 10.5x
in FY13E whereas on EV/EBIDTA it is trading at 8.2x and 6.8x in FY12E and
FY13E respectively. The share price of Havells has fallen down
considerably due to the reduced guidelines given by Philips Gobal in
Europe; where Philips has reduced its budgeted guidelines from double
digit revenue growth to single digit and margin contraction. However, we
have not projected any growth in Europe under Sylvania. We expect
Sylvania to post 7.5% EBIDTA margin in FY12E owing to the price hike
taken across various geographies will boost the profitability of the
business. We have reduced our consolidated EPS by 6.1% to Rs. 28 per
share in FY12E and by 8.6% to Rs. 34.5 per share post Q1FY12 result. We
believe conitnous new product launches and price hike across product
verticals would drive 15% domestic revenue growth in FY12E. We have
recommended Havells at a price of Rs. 354 per share on 16th March 2011
with a target price of Rs. 450 per share, which got achieved on 15th June
2011. Due to better result in Q4FY11 and Sylvania trunaround, we had
revised our target price to Rs. 477 per share in Q4FY11 result. Due to the
muted performance in Q1FY12 result, we have reduced our target price
to Rs. 450 per share. We recommend a “BUY” with a target price of Rs.
450 per share, an upside of 25% for a long term view.
Standalone Quarterly Results
Net Sales for Q1FY12 increased by 16.1% to Rs. 799.95 crs as compared to Rs.
688.82 crores in Q1FY11 and was down by 4.9% from Rs. 840.82 crores in
Q4FY11. The revenue was up YoY due to the good growth recorded in the cables
(25.7% YoY growth) and Lighting & Fixtures (20.7% YoY growth). However,
Switchgear segment reported a mere growth of 1.4% YoY to Rs 186.34 crores
owing to loss of business from non‐branded sales in UK. EBIT margin of all the
segments reduced in the quarters due to increase in input costs exceprt
switchgear reported margin expansion due to low cost inventory.
EBITDA increased by 10.3% to Rs. 88.41 crores in Q1FY12 compared to Rs. 80.18
crores in Q1FY11 and was down by 10.7% from Rs. 99 crores in Q4FY11. The
Company reported an EBITDA margin of 11.1% in Q1FY12, as compared to 11.6%
in Q1FY11 and 11.8% in Q4FY11. The margins were down because of higher
advertisement expenses and significant growth in input costs.
Net Profit for Q1FY12 went up by 7.8% to Rs. 57.5 crores as compared to Rs.
53.33 crores in Q1FY11 and decreased by 16.7% from Rs. 69.04 crores in Q4FY11.
Havells reported a PAT margin of 7.2% in Q1FY12, as compared to 7.7% in
Q1FY11 and 8.2% in Q4FY11. The margins were under pressure owing to
increased depreciation and interest cost because of higher working capital
requirement.
Key takeaways from Q1FY12 results conference call
The company has spent a large part (42%) of its annual advertisement budget of
Rs. 1 bn during Q1FY12 for IPL. IPL generally takes place in March end, but this
year IPL took place in April, so entire advertisement costs was reported in
Q1FY12, thus hitting the margins. The management has indicated that it will not
overshoot the scheduled budget for advertisement in FY12.
The management is of the view that with the help of better product and pricing
mix, they will be able to improve margin in Sylvania.
Management has guided for EUR 450 mn topline and EBITDA margin to be in the
range of 7.5% and 8.0% for Sylvania during FY12E.
While Latin American market posted strong growth of 25% Y‐o‐Y at USD 52.3 mn,
the same was under reported in EUR terms due to unfavourable currency
movement.
Havells has effected price hikes in Europe and Latin American market in July
2011 and is expected to take further price hike during August and September
2011. We expect the price hike will boost the profitability of the international
business going forward. The company has also indicated of the additional price
hikes in the domestic market as well.
The company believes that margins registered in Q1FY12 in switchgear (38.4%)
and cable & wires (8.7%) are sustainable.
The management has indicated that margin in lighting & fixtures business (at
24.9% in Q1FY12 as against 15.9% in Q1FY11) was due to the strong volume
growth registered in CFL business. The management is of the view that the
current margins are sustainable going forward.
Havells has maintained high level of low cost inventory in Fans business. The
management has given the guidance of 15% growth in the fans business.
The company has planned capex of Rs. 190 crores in FY12E:
Switchgear – Rs. 25 crores
Cables – Rs. 30 crores
Lighting – Rs. 50 crores
Fans – Rs. 25 crores
Warehouse – Rs. 55 crores
The company is having a plan to launch domestic appliances during August 2011.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Snapshot of Quarterly Results
The company reported a Net Sales for Q1FY12 increased by 16.1% to
Rs. 799.95 crs YoY due to the good growth recorded in the cables
(25.7% YoY growth) and Lighting & Fixtures (20.7% YoY growth).
EBITDA increased by 10.3% to Rs. 88.41 crores in Q1FY12 YoY. The
Company reported an EBITDA margin of 11.1% in Q1FY12, fall of
50bps because of higher advertisement expenses and significant
growth in input costs.
Net Profit for Q1FY12 went up by 7.8% to Rs. 57.5 crores YoY. Havells
reported a PAT margin of 7.2% in Q1FY12, contraction of 50 bps. The
margins were under pressure owing to increased depreciation and
interest cost because of higher working capital requirement.
Sylvania: Sylvania reported mere 1.4% YoY revenue growth to €106.7mn
in Q1FY12 as compared to €105.4 with Europe declining 3% YoY to
€64mn due to seasonality in business. But, LATAM and Asia reported YoY
healthy growth at 8.1% and 20.7% respectively. EBIDTA grew by 36.8%
YoY to €7.8mn in Q1FY12 as compared to €5.7mn in Q1FY11 due to the
better product mix and improved pricing. EBIDTA margin stood at 7.3%
in Q1FY12, a jump of 190 bps YoY from 5.4% in Q1FY11. Sylvania
reported Adjusted PAT at €2.4mn for Q1FY12 as against loss of €0.2 mn
in Q1FY11.
Valuation & Recommendation
At CMP of Rs. 360, the stock is trading at a PE of 12.9x in FY12E and 10.5x
in FY13E whereas on EV/EBIDTA it is trading at 8.2x and 6.8x in FY12E and
FY13E respectively. The share price of Havells has fallen down
considerably due to the reduced guidelines given by Philips Gobal in
Europe; where Philips has reduced its budgeted guidelines from double
digit revenue growth to single digit and margin contraction. However, we
have not projected any growth in Europe under Sylvania. We expect
Sylvania to post 7.5% EBIDTA margin in FY12E owing to the price hike
taken across various geographies will boost the profitability of the
business. We have reduced our consolidated EPS by 6.1% to Rs. 28 per
share in FY12E and by 8.6% to Rs. 34.5 per share post Q1FY12 result. We
believe conitnous new product launches and price hike across product
verticals would drive 15% domestic revenue growth in FY12E. We have
recommended Havells at a price of Rs. 354 per share on 16th March 2011
with a target price of Rs. 450 per share, which got achieved on 15th June
2011. Due to better result in Q4FY11 and Sylvania trunaround, we had
revised our target price to Rs. 477 per share in Q4FY11 result. Due to the
muted performance in Q1FY12 result, we have reduced our target price
to Rs. 450 per share. We recommend a “BUY” with a target price of Rs.
450 per share, an upside of 25% for a long term view.
Standalone Quarterly Results
Net Sales for Q1FY12 increased by 16.1% to Rs. 799.95 crs as compared to Rs.
688.82 crores in Q1FY11 and was down by 4.9% from Rs. 840.82 crores in
Q4FY11. The revenue was up YoY due to the good growth recorded in the cables
(25.7% YoY growth) and Lighting & Fixtures (20.7% YoY growth). However,
Switchgear segment reported a mere growth of 1.4% YoY to Rs 186.34 crores
owing to loss of business from non‐branded sales in UK. EBIT margin of all the
segments reduced in the quarters due to increase in input costs exceprt
switchgear reported margin expansion due to low cost inventory.
EBITDA increased by 10.3% to Rs. 88.41 crores in Q1FY12 compared to Rs. 80.18
crores in Q1FY11 and was down by 10.7% from Rs. 99 crores in Q4FY11. The
Company reported an EBITDA margin of 11.1% in Q1FY12, as compared to 11.6%
in Q1FY11 and 11.8% in Q4FY11. The margins were down because of higher
advertisement expenses and significant growth in input costs.
Net Profit for Q1FY12 went up by 7.8% to Rs. 57.5 crores as compared to Rs.
53.33 crores in Q1FY11 and decreased by 16.7% from Rs. 69.04 crores in Q4FY11.
Havells reported a PAT margin of 7.2% in Q1FY12, as compared to 7.7% in
Q1FY11 and 8.2% in Q4FY11. The margins were under pressure owing to
increased depreciation and interest cost because of higher working capital
requirement.
Key takeaways from Q1FY12 results conference call
The company has spent a large part (42%) of its annual advertisement budget of
Rs. 1 bn during Q1FY12 for IPL. IPL generally takes place in March end, but this
year IPL took place in April, so entire advertisement costs was reported in
Q1FY12, thus hitting the margins. The management has indicated that it will not
overshoot the scheduled budget for advertisement in FY12.
The management is of the view that with the help of better product and pricing
mix, they will be able to improve margin in Sylvania.
Management has guided for EUR 450 mn topline and EBITDA margin to be in the
range of 7.5% and 8.0% for Sylvania during FY12E.
While Latin American market posted strong growth of 25% Y‐o‐Y at USD 52.3 mn,
the same was under reported in EUR terms due to unfavourable currency
movement.
Havells has effected price hikes in Europe and Latin American market in July
2011 and is expected to take further price hike during August and September
2011. We expect the price hike will boost the profitability of the international
business going forward. The company has also indicated of the additional price
hikes in the domestic market as well.
The company believes that margins registered in Q1FY12 in switchgear (38.4%)
and cable & wires (8.7%) are sustainable.
The management has indicated that margin in lighting & fixtures business (at
24.9% in Q1FY12 as against 15.9% in Q1FY11) was due to the strong volume
growth registered in CFL business. The management is of the view that the
current margins are sustainable going forward.
Havells has maintained high level of low cost inventory in Fans business. The
management has given the guidance of 15% growth in the fans business.
The company has planned capex of Rs. 190 crores in FY12E:
Switchgear – Rs. 25 crores
Cables – Rs. 30 crores
Lighting – Rs. 50 crores
Fans – Rs. 25 crores
Warehouse – Rs. 55 crores
The company is having a plan to launch domestic appliances during August 2011.
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