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UBS Investment Research
First Read: Havells
P ositive read-through from Philips results
Event: Philips reported stable third quarter lighting results
Philips reported 8% constant currency YY growth in the lighting segment; ex LED,
the growth was 4.5%. EBTIDA margin went down from 550 bps YY (as Philips
had warned earlier), but was up 10% QQ to 5.8% in Q311. The Company's midterm
2013 target for EBTIDA is 8-10%. Emerging Markets continued to show
robust double digit growth.
Impact: Positive read through for Havells
The market has been worried about Havells’ exposure to Europe; however, we
believe Philips’ results demonstrate the European lighting business is relatively
stable.
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 11.5x FY13E PE. We believe this is very
attractive for a high-quality business: for FY11-15, we forecast 30%+ ROE and
20%+ EPS growth.
Havells India
Havells India (Havells), a leading Indian electrical consumer durables
manufacturer, is focussed on markets including switchgear, fans, lighting and
fixtures, and cables and wires. In April 2007, it acquired Sylvania's European,
Latin American, and Asian operations for 227m. Havells was incorporated in
1983.
Statement of Risk
HVEL is present in market segments that may face increased competition from
competitors, which may hurt our revenue growth as well as margin assumptions.
HVEL derives 30% of its consolidated revenue from Europe. Severe slowdown
in Europe can hurt HVEL consolidated revenue and profits.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
First Read: Havells
P ositive read-through from Philips results
Event: Philips reported stable third quarter lighting results
Philips reported 8% constant currency YY growth in the lighting segment; ex LED,
the growth was 4.5%. EBTIDA margin went down from 550 bps YY (as Philips
had warned earlier), but was up 10% QQ to 5.8% in Q311. The Company's midterm
2013 target for EBTIDA is 8-10%. Emerging Markets continued to show
robust double digit growth.
Impact: Positive read through for Havells
The market has been worried about Havells’ exposure to Europe; however, we
believe Philips’ results demonstrate the European lighting business is relatively
stable.
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 11.5x FY13E PE. We believe this is very
attractive for a high-quality business: for FY11-15, we forecast 30%+ ROE and
20%+ EPS growth.
Havells India
Havells India (Havells), a leading Indian electrical consumer durables
manufacturer, is focussed on markets including switchgear, fans, lighting and
fixtures, and cables and wires. In April 2007, it acquired Sylvania's European,
Latin American, and Asian operations for 227m. Havells was incorporated in
1983.
Statement of Risk
HVEL is present in market segments that may face increased competition from
competitors, which may hurt our revenue growth as well as margin assumptions.
HVEL derives 30% of its consolidated revenue from Europe. Severe slowdown
in Europe can hurt HVEL consolidated revenue and profits.
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