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Havells India Ltd Overweight
HVEL.NS, HAVL IN
Stock undone by others' follies?
Stock reacting to weak Crompton Greaves results: HAVL stock is
down 5.9% today, following weak results from Crompton (covered by
JPM analyst Sumit Kishore). While Crompton is not strictly comparable
to Havells, its domestic consumer business has some overlap. Crompton
had guided to 25% growth in consumer division but reported just 2.2%
growth in 1Q. According to Crompton, the main weakness came from
Fans sub-division which constitutes around 45% of Consumer division.
Why we think HAVL stock is over-reacting: 1) Fans comprises only
about 8% of HAVL's consolidated revenues. If we reduce our fans
growth assumption from 24% currently to 5% growth, FY12E EPS
impact is only 1.3%. 2) HAVL management had guided to 15-20%
growth for their domestic consumer business. We discussed the
Crompton results with HAVL management and asked them for
implications on their business. While management admitted that there is
some demand softness in the quarter, they say that it is in line with their
expectations and HAVL is on course to deliver on its guidance.
HAVL stock is down 11% over past 1 month, enhances buying
opportunity in our view: First it was guidance cut by Philips in Europe,
and now a disappointment from Crompton that have been a drag on
HAVL stock performance. While we acknowledge the softer demand
environment, we believe that disappointments in both Philips and
Crompton are specific to the companies not meeting their guidance. In
this context, we believe that HAVL management has been more
measured in their guidance and we see slim chances for disappointment.
HAVL is now trading at 11.3xFY12E P/E and 9.0xFY13E P/E, which
we believe are attractive valuations even after considering any potential
growth disappointments ahead.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Havells India Ltd Overweight
HVEL.NS, HAVL IN
Stock undone by others' follies?
Stock reacting to weak Crompton Greaves results: HAVL stock is
down 5.9% today, following weak results from Crompton (covered by
JPM analyst Sumit Kishore). While Crompton is not strictly comparable
to Havells, its domestic consumer business has some overlap. Crompton
had guided to 25% growth in consumer division but reported just 2.2%
growth in 1Q. According to Crompton, the main weakness came from
Fans sub-division which constitutes around 45% of Consumer division.
Why we think HAVL stock is over-reacting: 1) Fans comprises only
about 8% of HAVL's consolidated revenues. If we reduce our fans
growth assumption from 24% currently to 5% growth, FY12E EPS
impact is only 1.3%. 2) HAVL management had guided to 15-20%
growth for their domestic consumer business. We discussed the
Crompton results with HAVL management and asked them for
implications on their business. While management admitted that there is
some demand softness in the quarter, they say that it is in line with their
expectations and HAVL is on course to deliver on its guidance.
HAVL stock is down 11% over past 1 month, enhances buying
opportunity in our view: First it was guidance cut by Philips in Europe,
and now a disappointment from Crompton that have been a drag on
HAVL stock performance. While we acknowledge the softer demand
environment, we believe that disappointments in both Philips and
Crompton are specific to the companies not meeting their guidance. In
this context, we believe that HAVL management has been more
measured in their guidance and we see slim chances for disappointment.
HAVL is now trading at 11.3xFY12E P/E and 9.0xFY13E P/E, which
we believe are attractive valuations even after considering any potential
growth disappointments ahead.
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