Havells India's Q4FY18 results (Outperformer) - All round performance
Q4FY18 standalone result highlights
- Adj PAT +37%yoy to Rs1.7bn: led by margin expansion across segments.
- Revenues +48% yoy to Rs25.3bn: with ex-Lloyd growth at 14% yoy to Rs19.5bn led by lighting and ECD (+20% yoyeach) led by uptick in water heaters & purifiers, fans, LEDs, etc. Cables +13.4% yoy (+6% volume growth) was led by domestic cables, while switchgears (+5% yoy) was led by B2B segment (order from Hyundai Electric). Lloyd saw flat revenues at Rs5.8b as pre-buying in 3Q18 impacted volumes.
- Margin expansion across segments: with ex-Lloyd margins +120bps yoy to 14.6% on positive operating leverage, cost efficiencies, higher premium products, etc. Lloyd margins were at 12.4% for 4QFY18 and 8% for FY18 led by higher volumes, price hikes and cost rationalisation. EBITDA +56% yoy to Rs3.58bn (ex-Lloyd +24% yoy).
- FY18 PAT +17% yoy to Rs7bn: Ex-Lloyd Havells saw 10%/14% revenue & EBITDA growth. EBITDA margin +50bps yoy to 13.9%.
Conf call highlights: (1) ECD seeing traction across categories; mkt share gains in fans (+18% yoy) and water heaters (+10% yoy) vs flat industry growth. New segments and traction in appliances aiding growth for ECD; (2) Lloyd like to like growth of 11% in FY18; expect low double digits growth over medium term with gradual increase in margins; also increasing reach in modern retail (3) RAC demand in Q1FY19 muted due to unseasonal rains in certain regions (4) FY19 Capex at Rs5bn including RAC plant with 600k units capacity to come up by Q4FY19/early FY20. (5) shift to organised segment to be gradual, while real estate demand remains muted as reflect in switchgears and cables (flat volumes in FY18)
Key positives: Robust margins across segments notably Lloyd
Key negatives: Muted growth in switchgear
Impact on financials: FY19/FY20 EPS unchanged at Rs13.3/16.5
Valuations & view
Havells has continued its focus on enhancing brand value, new product launches (air purifiers, home automation, etc) & deep channel engagement. Havells is fortifying its competitive position by focusing on technology, strengthening channel & addressing untapped mkts, particularly in B2B segments. Lloyd acquisition is further catapulting Havells into a strong growth segment. A culmination of these factors & shift to organised players will accelerate earnings (21% earnings CAGR over FY18-20E). Hence, valuations are likely to remain rich (33x FY20E). Outperformer.
Havells India is a Fast Moving Electrical Goods (FMEG) company based in India. Co. is active across a variety of market segments with a wide spectrum of products, including Industrial & Domestic Circuit Protection Devices, Cables & Wires, Motors, Pumps, Fans, Modular Switches, Home Appliances, Electric Water Heaters, Power Capacitors, CFL Lamps, Luminaires for Domestic, Commercial and industrial Applications. Co.'s global brand names include Havells, Crabtree, Sylvania, Concord, Luminance and Standard. Co. maintains a global network consisting of 91 branches & representative offices in over 50 countries. Co.'s manufacturing plants are loacted in India, Europe, Latin America, Africa & China.
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