In-line Q4: maintain HOLD on limited upside potential
HAVL posted an in-line Q4 with standalone sales/adj. PAT at Rs 11.7bn/ Rs 1.08bn (+10%/23%YoY). Standalone EBITDA margins rose 80bps YoY to 12.5% on a better product mix and lower ad spends. Topline growth was led by strong growth in Switchgears (↑31% YoY)/Lighting segments (↑20% YoY). The Cable segment remained a dampener (sales: ↓3%/EBIT margin: ↓300bps to 6%). Sylvania’s performance was impacted by softness in Europe/ currency volatility in Latin America. Maintain HOLD on limited upside.
Traction in Switchgear led by new product line: The Switchgear segment (~27% of standalone business) saw a strong 31% YoY growth led by traction in new products (newly launched Reo contributed Rs 220mn/Rs 340mn in Q4/FY13). The segment saw an organic growth of 22% YoY. Sales for the Lighting segment were up 20% YoY.
Weakness in Industrial Cables continues: The Cable segment (~40% of standalone business) saw a sales decline of 3% YoY during the quarter, impacted by weakness in industrial cables which de-grew 17% (domestic cables up 20%).
Lower ad spends aid operating margins: Ad spends were down to 2% of sales (50bps lower YoY) helped by an overall improvement in EBITDA margins. Margins were also aided by a better product mix in the Consumer segment.
Sylvania impacted by overall weakness in Europe, currency fluctuation: Sylvania’s sales for quarter were up 1% YoY (Europe flat/ Americas down 5% YoY).Operating margins for Europe were down 40bps YoY to 9.5% (including pension benefits; excluding this, margins were at 7.6%). Operating margins for Americas were down 320bps YoY to 3.8%, impacted by currency volatility in Latin America.
Valuations: We restate a HOLD on HAVL with a Mar’14 TP of Rs 700, and maintain our estimates as current valuations price in the possible upsides in Sylvania.
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HAVL posted an in-line Q4 with standalone sales/adj. PAT at Rs 11.7bn/ Rs 1.08bn (+10%/23%YoY). Standalone EBITDA margins rose 80bps YoY to 12.5% on a better product mix and lower ad spends. Topline growth was led by strong growth in Switchgears (↑31% YoY)/Lighting segments (↑20% YoY). The Cable segment remained a dampener (sales: ↓3%/EBIT margin: ↓300bps to 6%). Sylvania’s performance was impacted by softness in Europe/ currency volatility in Latin America. Maintain HOLD on limited upside.
Traction in Switchgear led by new product line: The Switchgear segment (~27% of standalone business) saw a strong 31% YoY growth led by traction in new products (newly launched Reo contributed Rs 220mn/Rs 340mn in Q4/FY13). The segment saw an organic growth of 22% YoY. Sales for the Lighting segment were up 20% YoY.
Weakness in Industrial Cables continues: The Cable segment (~40% of standalone business) saw a sales decline of 3% YoY during the quarter, impacted by weakness in industrial cables which de-grew 17% (domestic cables up 20%).
Lower ad spends aid operating margins: Ad spends were down to 2% of sales (50bps lower YoY) helped by an overall improvement in EBITDA margins. Margins were also aided by a better product mix in the Consumer segment.
Sylvania impacted by overall weakness in Europe, currency fluctuation: Sylvania’s sales for quarter were up 1% YoY (Europe flat/ Americas down 5% YoY).Operating margins for Europe were down 40bps YoY to 9.5% (including pension benefits; excluding this, margins were at 7.6%). Operating margins for Americas were down 320bps YoY to 3.8%, impacted by currency volatility in Latin America.
Valuations: We restate a HOLD on HAVL with a Mar’14 TP of Rs 700, and maintain our estimates as current valuations price in the possible upsides in Sylvania.
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