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Emkay Global Research
Havells India (Buy)
CMP: ₹643.5
Target: ₹715
After upgrading Havells to ‘Hold’ recently, we are further upgrading the stock to ‘Buy’ in the wake of positive feedback from recent channel checks which corroborate our estimates and projections that bake in a gradual revenue recovery from Q4FY20.
a) Our channel checks suggested that Havells had lost market share in Fans in Q2 and Q3, while it has started to recover from December 2019. Revenue growth in the core business (ex-Lloyd) has started to rebound from Q4, with revenue growth seen in Fans as well.
b) Favourable base from Q4FY20 and moderated growth assumption for the ensuing quarter and a gradual uptick expected in government spending from Q1FY21, which has direct co-relation with 30 per cent of Havells’ revenues, should lead to growth from Q4FY20.
c) We raise target multiple to 40x FY22E EPS from 35x, with a revised target price of ₹715 as we see recovery in revenue growth, which has been lagging for the last four quarters. We are baking in revenue/EBITDA/PAT CAGR (FY20-22E) of 13 per cent/15 per cent/19 per cent. We are ‘Equal Weight’ in EAP.
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