Emkay Global Financial has given Hold recommendation for Havells India with a target price of Rs. 1240 in its research report issued on May 05, 2022

Emkay Global Financial’s report on Havells India

Revenue print was solid with 31% yoy growth, led by a 20% rise in volumes. All segments, except for Switchgear, beat revenue estimates. The disruption in house construction in Jan-Feb led to Switchgear’s poor show. GMs fell by 800bps yoy, surprising negatively. EBITDA margin contracted 340bps yoy despite lower ad spends and other opex. Lloyd’s 62% revenue growth yoy was led by distribution expansion and market share gains, while management attributed commodity inflation and delayed price hikes to the EBIT loss. Demand momentum continued in Apr’22. Management said it will wait for some more time to pass on commodity inflation fully. Lloyd’s strategy for gaining market share is working well. However, management remained non-committal regarding profitability timelines.

Outlook

We have cut FY23E EPS by 3% but have raised FY24E EPS by 3%. Commodity inflation and delayed price hikes should keep margins under check in near term. Maintain Hold with a revised Jun’23E TP of Rs 1,240 (implied PE of 41x vs. 43x, using a 2-stage DCF model).

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