Prabhudas Lilladher recommended reduce rating on Havells India with a target price of Rs 524 in its research report dated July 27, 2020.
Prabhudas Lilladher's research report on Havells India
HAVL’s management remains cautious on the sustainability of the demand trends witnessed in May and June given localized lockdowns adversely impacting business operations. HAVL’s consumer portfolio has bounced back faster, however, road to recovery in the B2B portfolio (30% of sales), comprising of industrial cables, switchgears, professional luminaire is likely to be long given lower spends on infrastructure/real estate. Given that Havells has poor presence in small towns and rural India which are leading recovery, extrapolating June sales does not seem feasible. Lloyd’s RAC business grew faster than industry in CY20 benefitting from low base and reduced dependence on imports due to its in-house manufacturing. Despite its peak summer season being a wash out, Lloyd reported 80bps increase in margin YoY. However, entry into highly competitive Refrigerator segment needs to be watched out for as it can increase overheads and put pressure on margins.
Outlook
We estimate 13.9% PAT CAGR over FY20-23. Maintain Reduce with a target price of Rs524 (33x Sept-22PS).
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