MOSL: HAVELLS INDIA (neutral)-Strong operating performance led by B2B businesses
HAVELLS INDIA: Strong operating performance led by B2B businesses
(HAVL IN, Mkt Cap USD9.7b, CMP INR1151, TP INR1120, 3% Downside, Neutral)
Margin normalization to offset strong demand, limiting EPS growth
- Havells India (HAVL)'s 1QFY22 earnings were a strong beat, led by surprisingly robust revenues (+76% YoY; two-year CAGR of -2%) and strong operating leverage. The key takeaway for us is the diversified product portfolio strength and strong brand positioning, which is resilient to commodity inflation risks.
- Segmental insights suggest that while Cables and Wires as well as Switchgears benefitted from commodity price inflation, ECD and Lighting saw margin compression. Lloyd, on the other hand, was a laggard in terms of demand as well as margins. These insights are in line with our thesis on the impact of commodity price inflation across various product categories (read here, here, and here).
- While the earnings beat is largely attributable to better-than-expected revenues during the quarter, this also means the pent-up component may be absent for the remainder of the year. Overall, the demand environment looks good at a double-digit structural growth rate, while margin normalization may limit earnings growth. We raise our FY22-24E EPS estimate by 9% each, factoring in 1QFY22 performance. Maintain Neutral, with TP of INR1,120 (unchanged target multiple of 50x Mar'23E EPS).
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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