MOSL: HAVELLS INDIA (Downgrade to Neutral)-Margin pressure in near term-Priced to perfection
Havells India: Margin pressure in near term; Priced to perfection, downgrade to Neutral
(HAVL IN, Mkt Cap USD6.5b, CMP INR730, TP INR800, 10% Upside, Downgrade to Neutral)
- What went wrong this quarter? (a) The Lloyd business was disappointing as revenue declined 9% YoY and margins shrank to 3.4% (4QFY18: 12.4%). (b) ECD business also reported lower revenue growth at 9% (9MFY19: 36%) as the fans segment was impacted by delayed summer. Overall, slowdown in consumption and liquidity crunch impacted business with the situation continuing into April-May. Overhang of the recently concluded elections also impacted revenue. 4QFY19 revenue growth stood at 9%, while EBITDA margin was down 240bp to 11.7%. Adj. PAT declined 12% YoY to INR2.1b.
- FY19 marked by strong revenue growth, but challenges on margin front: Overall, FY19 was marked by robust revenue growth; overall revenues grew 23.6%, with Havells (ex-Lloyd) at 22% (4QFY19: 14%). The company surpassed INR100b revenue this year. Segment wise - cables grew 24%, Switchgears 19%, Lighting 12% and ECD at 28% for full-year FY19. However, the year was challenging on the margin front, with margins contracting 60bp for Havells (ex-Lloyd portfolio) and 270bp to 5.3% for the Lloyd business. Thus, overall blended EBITDA margin contracted 100bp to 11.9% for the full year, offsetting large part of revenue growth.
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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