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We recently met the management of HAVL for an update. HAVL has
launched a wide range of consumer durable products in India, positioned
at the premium end. The initial market response has been favorable and
should aid domestic business growth. Sylvania turnaround is on track;
however we cut our estimates for Sylvania following 20% estimate cuts by
our European capital goods team to reflect macro headwinds in Europe.
Maintain OW, with revised PT of Rs550 based on 15x FY13E P/E.
Consumer durables range rolled out in the domestic market. HAVL
have rolled out a wide range of consumer durable products including steam
irons, food processors, rice cookers, toasters and grills. These products are
positioned at the premium end of the market and HAVL management
expects these to contribute about Rs500MM to sales in FY12, which should
help buoy domestic business revenues.
Europe turnaround on track, but we cut estimates for Sylvania.
Management indicated that turnaround of Sylvania is on track. However, we
are reducing our estimates for Sylvania over FY12E-FY13E, following 20%
estimate cuts by our European capital goods team led by Andreas Willi.
(See detailed note "Cutting Estimates, near term downside risks remain").
We are now assuming a 2% decline in revenues and 7% EBITDA margins
for FY12E in Europe. As a result, we reduce our FY12E-FY14E
consolidated EPS estimates for HAVL by 10%-11.7%.
Raw material costs abating. Recent declines in Copper and Aluminum
prices bode well and could lead to potential margin upsides, not factored
into our estimates. Every 1% change in copper and aluminum impacts our
EPS estimates by 1.5% and 1% respectively.
Revise Price Target to Rs550: We revise our Mar 12 price target to Rs550
(Rs600 earlier), based on 15xFY13E P/E. HAVL stock has declined 20%
over past 3 months and current valuation of 9.3x FY13E P/E is reflecting
excessive pessimism to growth, in our view. After revising our estimates, we
still see HAVL delivering 21% EPS CAGR over FY11-FY14E and 23%
ROCE in FY13E. Maintain Overweight.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
We recently met the management of HAVL for an update. HAVL has
launched a wide range of consumer durable products in India, positioned
at the premium end. The initial market response has been favorable and
should aid domestic business growth. Sylvania turnaround is on track;
however we cut our estimates for Sylvania following 20% estimate cuts by
our European capital goods team to reflect macro headwinds in Europe.
Maintain OW, with revised PT of Rs550 based on 15x FY13E P/E.
Consumer durables range rolled out in the domestic market. HAVL
have rolled out a wide range of consumer durable products including steam
irons, food processors, rice cookers, toasters and grills. These products are
positioned at the premium end of the market and HAVL management
expects these to contribute about Rs500MM to sales in FY12, which should
help buoy domestic business revenues.
Europe turnaround on track, but we cut estimates for Sylvania.
Management indicated that turnaround of Sylvania is on track. However, we
are reducing our estimates for Sylvania over FY12E-FY13E, following 20%
estimate cuts by our European capital goods team led by Andreas Willi.
(See detailed note "Cutting Estimates, near term downside risks remain").
We are now assuming a 2% decline in revenues and 7% EBITDA margins
for FY12E in Europe. As a result, we reduce our FY12E-FY14E
consolidated EPS estimates for HAVL by 10%-11.7%.
Raw material costs abating. Recent declines in Copper and Aluminum
prices bode well and could lead to potential margin upsides, not factored
into our estimates. Every 1% change in copper and aluminum impacts our
EPS estimates by 1.5% and 1% respectively.
Revise Price Target to Rs550: We revise our Mar 12 price target to Rs550
(Rs600 earlier), based on 15xFY13E P/E. HAVL stock has declined 20%
over past 3 months and current valuation of 9.3x FY13E P/E is reflecting
excessive pessimism to growth, in our view. After revising our estimates, we
still see HAVL delivering 21% EPS CAGR over FY11-FY14E and 23%
ROCE in FY13E. Maintain Overweight.
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