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Target:₹1,621
CMP: ₹1,228
Havells India reported strong revenue growth of 62.6 per cent y-o-y in Q1-FY23 (three year CAGR 16 per cent). There were no price hikes in any segment (except switchgears) during the quarter. Marketing and brand building investments increased y-o-y and q-o-q during Q1FY23.
We believe distribution expansion has helped company to clock strong growth in affordable segments. Rural markets now account for 5 per cent of company’s revenues.
Due to input inflation and high ad-spend, the company’s profitability remained subdued. In Lloyd segment, the company now has a complete product portfolio of washing machines and plans to complete the range of refrigerators in FY23. While the segment more than doubled its revenue y-o-y, profitability remains distressed.
We believe healthy volume growth of early teens will likely continue and model Havells to report revenue and PAT CAGR of 21.9 per cent and 22.9 per cent over FY22-FY24. We remain structurally positive on the company due to its competitive advantages and growth opportunity in consumer durables.
However, we cut our earnings estimates to factor in weak profitability during the quarter. Maintain BUY with a DCF-based target price of ₹1,621 (56x FY24 EPS).
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