UBS: Havells India - Zumtobel results show that European lighting demand is stable

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UBS Investment Research
Havells India
Zumtobel results show that European
lighting demand is stable
􀂄 Event: Zumtobel reported stable results
Zumbtobel reported 9.3% YY revenue growth. Southern / Eastern Europe were
relatively weak at 2.7%/3.7% YY. Ex LED lighting revenue growth was 4% YY.
EBIT margins declined 50 bps from 6.1% to 5.6%. Zumtobel management retained
guidance for 10% YY revenue growth for FY12 (April 2012) and margin
expansion. In July, Rexel management had indicated 2-3% volume growth
guidance for CY11. Philips management had also indicated that it has taken price
increases in Lighting.
􀂄 Impact: European lighting demand is stable yet
Zumtobel results show that the lighting market is relatively stable. We model
Europe / Latin America to grow at (-)2% / 15% YY (Latin America grew at 24%
CAGR over last 4 quarters) and 100 bps margin decline (over Q4 FY11).
􀂄 Action: Retain estimates and price target
We retain our estimates and Rs 510 price target
􀂄 Valuation
We derive our price target from a DCF-based methodology and explicitly forecast
long-term valuation drivers using UBS’s VCAM tool (assuming a WACC of
13.19%). The stock is trading at 12.5x FY12E PE. We believe this is very
attractive for a high-quality business: for FY11-15, we forecast 30%+ ROE and
20%+ EPS growth.

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