Leading brokerage firm Geojit Financial Services Ltd has recommended the large-cap stock of Havells India Ltd (HAVL) for a potential gain of 12%. HAVL is focusing on improving product mix, expanding distribution strength, and gaining market share. FY22 revenue grew by 33% YoY, supported healthy demand and higher realization.
1. Havells India Stock Outlook
The current market price of the stock is Rs 1107 apiece. The stock has touched a 52-week high of Rs 1504 and 52-week low of Rs 977 apiece. The large-cap stock has given a return of 11.12% and a return of 135% in 5 years. If investors buy the stock at the current market price of 1107 the stock can offer a potential gain of 12% with a target price of Rs 1245 apiece. Havells had declared a final dividend of Rs 4.50 per share and ex-dividend date was 14 June, 2022
|Current market price||Rs 1107|
|Target Price||Rs 1245|
|52-Week High||Rs 1505|
2. Havells India Growth
FY22 revenue grew by 33% YoY, supported healthy demand and higher realisation. Revenue growth was broad based across product categories; Cables & wires, Switch gears, Lighting & Consumer durables & other products which grew by 46%, 23%, 26%, 29% & 19% YoY, respectively. Lloyd's revenue grew by 34%. . Overall revival in construction sector was witnessed and this trend is expected to continue given pick-up in residential demand. In cables, B2B & B2C shown healthy growth. Consumer durable segments continue to witness strong growth; largely led by fans.
3. Havells India EBITDA Registers Growth
FY22 EBITDA grew by 12% and margins declined by 240bps to 12.7%. In Q4FY22, gross margins declined by 800bps to 29.3%. Led by cost rationalisation, decline in EBITDA margins was limited to 340bps to 11.8%. PAT grew by 17% YoY supported by higher other income. Going ahead, revenue growth is likely to be stable supported by strong B2B demand & pick-up in construction activities.
EBITDA margin is expected to improve gradually, led by price hikes. We lower our EBITDA margin estimates by 80bps & 110bps for FY23E & FY24E, considering the current elevated input cost. We expect PAT to grow by 22% over FY22-24E.
4. Havells India Valuation
According to Geojit, "current inflationary environment will remain for short term, post which, the margin will improve. HAVL's revenue growth remained healthy on account of pick-up in construction activities, revival in consumer sentiments and market share gains. Considering its strong product portfolio, improving distribution, market share gains and healthy balance sheet, we expect HAVL to trade at premium valuation.
Given healthy of 20% correction in stock price, we value HAVL at a P/E of 45x (historical average) on FY24E and upgrade to BUY with a target price of Rs.1,245."
5. About Havells India
Havells India Limited is a leading Fast Moving Electrical Goods (FMEG) Company and a major power distribution equipment manufacturer with a strong global presence. Havells enjoys enviable market dominance across a wide spectrum of products, including Industrial & Domestic Circuit Protection Devices, Cables & Wires, Motors, Fans, Modular Switches, Home Appliances, Air Conditioners, Electric Water Heaters, Power Capacitors, Luminaires for Domestic, Commercial and Industrial Applications, according to its website. The current market capitalization of the company is Rs 69,429 crore.
The stock has been picked from the brokerage report of Geojit Financial Services. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.