UBS : Havells -Good quarter with some weakness in switchgear

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UBS Investment Research
First Read: Havells
Good quarter with some weakness in
s witchgear
�� Strong results all around marred by muted switchgear exports
Havells reported Q1FY12 results; cables & wires/ lightings and fixtures / consumer
durables revenues grew 26%/21%/14% YY. Fans grew 10% YY. Overall
contribution margins grew 120 bps from 20.7% to 21.9% driven by contribution
margin growth across the board. We believe that Havells benefited from low priced
raw material inventory.
�� Switchgear weak due to drop in exports
Havells switchgear revenues grew 1.3% YY. Domestic switchgear revenue grew
10% from Rs1.53bn to Rs1.68bn; while switchgear exports dropped from
Rs325mn to Rs206mn. Switchgear exports dropped from Rs1.5bn to Rs1.1bn. The
management expects that Switchgear export revenues will stabilize at Rs0.7bn in
FY12.
�� Sylvania continues to be robust
Sylvania revenues increased 1.2% YY, but declined 6% QQ. European revenue
were flat YY, but declined 13% QQ. Americas / LatAm revenues increased 25%
YY from 42M to 49M. EBITDA margins in LatAm/NA grew 150 bps to 9.9%.
EBITDA margins for Sylvania declined from 7.9% in Q4FY11 to 7.3% in
Q1FY11.
�� Valuation: maintain Rs510.00 price target
We maintain our Rs510.00 price target. We derive our price target from a DCF
based methodology and explicitly forecast long-term valuation drivers using
UBS’s VCAM tool.