HAVELLS INDIA:: Diwali Picks - November 2012 ::Anand Rathi Top 7 - Diwali Picks

Company Introduction: Havells India Ltd.(HIL) is one of the largest electrical and power distribution equipment manufacturers engaged in selling entire gamut of household, commercial and industrial electrical devices. Its products include industrial and domestic circuit protection devices, cables and wires, motors, fans, power capacitors, compact fluorescent lamps (CFLs), luminaries for domestic, commercial and industrial applications and modular switches.
Investment Arguments One of the key strengths of HIL is its wide product range from Switchgear, Switches, Cables & Wires, CFL, Luminaries, Fans, Water Heaters and Kitchen appliances. HIL is better placed as compared to competition as it can target the entire distribution channel with its product range, which almost covers the electrical equipment market. It holds a market share ranging from 10-25% and is among the top 5 players in most product categories.
Expected Value: 715 Sector: Capital Goods
HIL is emerging as retail consumer durable brand. Recently it has entered into home appliances space like mixer, iron, grinder, induction stove etc. However this market is crowded but India being a consumer driven market offers ample scope to grow. HIL also established a strong pan India distribution network, which it is looking to enhance further. It currently has more than 5300 dealers in India, which it is looking to increase by about 500 each year in order to expand its reach. Company has very strong relationship with dealers which can be leveraged for selling consumer appliances.
Valuation
We strongly believe over medium term (3-4 years) company valuation multiple will also improve. As of now co. is treated as player in capital good segment hence commands lower multiple. We expect the stock is ready for re-reating. We valued the company at 16x for FY 15 which gives our target price of Rs. 715.

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