Hold Havells India; target of Rs 1250: Emkay Global Financial

Emkay Global Financial recommended hold rating on Havells India with a target price of Rs 1250 in its research report date October 21, 2021.

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Emkay Global Financial’s report on Havells India

Havells reported a 6% revenue beat in Q2, driven by Lighting and Others segments. On a 2-yr CAGR basis, revenue growth across segments was in the range of 10-38%. Margin delivery in C&W and Lloyd segments was disappointing. Volume & price contributed equally to revenue growth across categories, ex-C&W, to which volumes contributed 20%, indicating strong consumer sentiment. A&P spends surprised again, with a 34% decline on a 2-yr CAGR basis, despite robust revenue growth. Management remains optimistic about demand in the ensuing quarters and is hopeful of a gradual improvement in margins. Demand is broad-based, unlike last year. Price increases will reflect with a lag and aid margins. Channel inventory is at normalized level.

Outlook

Given the solid revenue print in Q2, along with an encouraging demand outlook and copper price inflation, we are raising FY22-24E revenue/EBITDA/PAT by 5-12%. Maintain Hold with a revised Dec’22 TP of Rs.1,250 (PE of 45x implied using a 2-stage DCF model).

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