November 21, 2015

Retain ‘buy’ on Havells India, target Rs 304: Nomura

The second quarter numbers of Havells India missed at the topline but EBITDA was in line on higher margin. 2H outlook appears robust on reviving infrastructure spend and upcoming festive demand.

The second quarter numbers of Havells India missed at the topline but EBITDA was in line on higher margin. 2H outlook appears robust on reviving infrastructure spend and upcoming festive demand. Increased industrial demand is likely to translate into stronger sales not only in wires and cables but also in switchgears where EBIT margins are likely to be sustained. This is likely to lead to increased sales and better EBIT margins.

Stronger infrastructure spending has led to increased demand for electrical wires and cables with industrial volumes up 16% y-y and domestic volumes up 4% y-y. Overall segment revenue was lower owing to lower commodity prices.

Increased industrial demand is likely to translate into stronger sales not only in wires and cables but also in switchgears where EBIT margins are likely to be sustained. This may lead to increased sales & better EBIT margins.

Revenue decline is attributable to: a) a 1.3% decline y-y in switchgears, b) cables and wires falling by 5% y-y despite volume growth of 16% and 4% in industrial and domestic segments owing to weaker commodity prices; c) lighting and fixtures growth (1.5% y-y) being muted as LED growth (+48% y-y) was offset by decline in CFL volumes; and d) electrical consumer durables growing at c6%.


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