This CDGS Stock Has Declared Its Highest Dividend of 750% Since Listing: Should You Buy?

Havells India Ltd is a large-cap company in the Consumer Discretionary Goods & Services (CDGS) sector with a market valuation of Rs 77,570.77 crore. Havells India has announced a final equity dividend of 750.00 per cent, or Rs 7.5 per share, for the fiscal year 2021-22. This translates to a dividend yield of 0.60 per cent at the current share price of Rs 1238.55. This is the highest dividend declared since the stock's listing date, and after Havells' Q4FY22 result update, brokerage firm ICICI Securities has issued a hold rating on the stock with a target price of Rs 1375.

Q4 FY22 result of Havells India as per the brokerage

• Strong performance on the revenue front. However, high raw material costs dragged overall EBITDA margin.
• Revenue up ~33% YoY to Rs 4417 crore led by volume growth of 20% YoY.
• EBITDA margin declined ~340 bps YoY to 11.8%, mainly due to lower gross margin. Gross margin saw a sharp fall of ~812 bps YoY (~300 bps QoQ) mainly due to higher raw material costs and delay in price hike.
• PAT increased ~17% YoY to ~Rs 353 crore tracking lower EBITDA margin.

Hold for a target price of Rs 1375

The brokerage has said "Strong B2C brand, focus on market share gains of Lloyd through improved product mix and dealer addition. The company's share price has grown 2.4x in the last five years. We revise our rating from BUY to HOLD. We value the stock at 53x FY24 EPS with revised target price to Rs 1375/share."

Key triggers for future price performance of Havells according to ICICI Securities

• Total ~1.7 crore new houses under PMAY, urbanisation and rising aspiration level will give a significant boost to demand for home appliances.
• Revival in the Lloyd business through new launches and improvement in segment margin.
• It aims to increase its town penetration from current 1150 to 2000 and retail touch points from 1.6 lakh to 2.5 lakh over the next five years.
• Model revenue, earnings CAGR of ~13%, 16%, respectively, in FY22-24E.

Disclaimer

The stock has been picked from the brokerage report of ICICI Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.