MOSL: HAVELLS INDIA (Buy)-Core business robust-cost pressures evident at Lloyd
Havells India: Core business robust; cost pressures evident at Lloyd
(HAVL IN, Mkt Cap USD6.2b, CMP INR711, TP INR820, 15% Upside, Buy)
- Operating performance meaningfully above expectations: Revenue grew 28% YoY to INR25b (our estimate: INR21.8b). Gross margin shrank 220bp YoY to 37.5%. EBITDA of INR2.95b (+12.3% YoY) was 6.2% ahead of our estimate. Ad spend increased to INR0.9b (3.6% of sales v/s 4% in 3QFY18), while employee costs rose 30% YoY to INR2.1b. Adj. PAT grew 18.3% YoY to INR1.9b, 5.8% above our estimate. For 9MFY19, sales/EBIDTA/PAT stood at INR73.1b (+30% YoY)/INR8.7b (+33% YoY)/INR5.8b (+33% YoY).
- Robust growth in core business (ex-Lloyd): Core business revenue grew 29% YoY to INR21.6b, led by strong growth across segments (Switchgears: +21% YoY; Cables: +31% YoY; Consumer Durables: +34% YoY). EBIDTA margin (excl. Lloyd) shrank 200bp YoY to 13.2% due to weak margin in Cables, Switchgears and ECD.
- Lloyd revenue grows robustly, margins under pressure though: Lloyd revenue grew 22% YoY to INR3.6b, supported by strong sales in LED panel category. However, EBIDTA margin contracted 120bp YoY to 1.7% on account of cost pressures and inability to take price hikes. HAVL expects margins to improve with the new plant likely to be ready by 4QFY19 (production to begin from Apr'19).
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.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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