The brokerage model Havells to report revenue/PAT CAGRs of 14.4%/19.5% over FY24–27E and RoE moving upwards over FY24-27 and remain positive on Havells led by its established competitive advantages and growth opportunity in white goods and durables. Maintain Buy with a DCF-based target price of Rs 1,800 (implied P/E of 52x FY27E EPS).
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ICICI Securities Report
Havells India Ltd.’s Ebitda margin has declined from 12.6% in FY10 to 9.9% in FY24 and we model it to be 9.3% in FY25E. There are structural as well as cyclical/transitory reasons for the margin contractions. While we believe:
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steep increase in competitive pressures in the ECD segment; and
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changes in technology and decline in realisation of lighting have impacted margins structurally, we also note cables and wires have reported steady margin expansion over FY10–24 led by strengthening brand equity and focus on B2C products.
We model transitory issues such as impact of plant relocation expenses of switchgear and revenue mix impact in ECD to resolve in FY26. We also model improvement in capacity utilisation of its cables and wires plant likely to drive operating leverage.
Focus on market share gains of Lloyd has helped outpace peers in air conditioners; but has also resulted in losses over FY20–24. We model Lloyd to break even on a full-year basis by FY27. However, additional investments (if any) in refrigerators and washing machines to gain market shares may continue to hurt margins. Initiatives in premiumisation as well as stable commodity prices also augur well for margin expansion over FY25–27E. We remain constructive. Maintain Buy.
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. Read more on Research Reports by NDTV Profit.ICICI Securities gives a Buy call for Havells India, says Initiatives in premiumisation as well as stable commodity prices also augur well for margin expansion over FY25–27E. Read MoreResearch Reports
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