Rating: HOLD | CMP: Rs1,028 | TP: Rs1,066
May 21, 2021 Covid wave stalls demand momentum
Q4FY21 Result Update Quick Pointers:
☑ Change in Estimates | ☑ Target | Reco . Price hikes of 3Q/4Q to fully reflect in coming quarters, margins to stabilize
Change in Estimates . Post lockdown recovery to be led by Metros/Tier 1, Rural and Small town to lag Current Previous FY22E FY23E FY22E FY23E We cut FY22/FY23 estimates by 9.1%/ 4.8% given 1) Covid-19 2nd wave led Rating HOLD HOLD Target Price 1,066 1,128 demand disruption and 2) commodity inflation led margin pressure. HAVL Sales (Rs. m) 1,15,725 1,36,724 1,23,506 1,40,696 reported another strong performance aided by 1) sustained momentum in % Chng. (6.3) (2.8) EBITDA (Rs. m) 16,410 19,835 17,486 20,343 consumer portfolio 2) pick up in infra and industrial portfolio from Jan % Chng. (6.2) (2.5) onwards and 3) low cost inventory. The management remained cautious in EPS (Rs.) 17.6 21.8 19.4 23.0 % Chng. (9.1) (4.8) the near term given 2nd Covid-19 wave led demand disruption and commodity inflation. However, they continue to remain optimistic over medium-longer Key Financials - Standalone term prospects given 1) likelihood of Metro/Tier 1 cities bouncing back Y/e Mar FY20 FY21 FY22E FY23E quickest post opening up of economy 2) consumer behavioral changes aiding Sales (Rs. m) 94,292 1,04,279 1,15,725 1,36,724 sustained market share gains from unorganized players and 3) Lloyd portfolio EBITDA (Rs. m) 10,274 15,653 16,410 19,835 Margin (%) 10.9 15.0 14.2 14.5 gaining steam (in-house manufacturing of RAC, change in industry dynamics PAT (Rs. m) 7,330 10,298 11,047 13,675 post import prohibitions and one stop offering with launch of refrigerators). EPS (Rs.) 11.7 16.5 17.6 21.8 Gr. (%) (6.9) 40.4 7.3 23.8 We estimate 15.2% earnings CAGR over FY21-23 and assign a target price of DPS (Rs.) 4.0 6.5 7.5 9.2 Rs1,066 based on DCF (Rs1,128 earlier). Maintain Hold on rich valuations. Yield (%) 0.4 0.6 0.7 0.9 RoE (%) 17.3 21.8 19.7 21.0 RoCE (%) 21.6 29.6 25.9 27.9 Sales grew by 50.3%, Adj. PAT up by 89.2%: Revenues grew by 50.3% YoY to EV/Sales (x) 6.7 6.0 5.4 4.5 Rs33.3bn with core segment growing by 55.9% while Lloyd grew by 29%. Gross EV/EBITDA (x) 61.6 40.1 37.9 31.0 PE (x) 87.8 62.5 58.3 47.1 margins expanded by 130bps YoY to 37.4%. EBITDA grew by 2.1x YoY to Rs5.1bn P/BV (x) 14.9 12.5 10.6 9.3 while margins expanded by 410bps YoY to 15.2%. Higher operating scale aided 180bps/120bps reduction in other expenses/employee cost (as a % of sales), Ad
Key Data HVEL.BO | HAVL IN spends as % of sale at 1.7% vs 1.5%. Adjusting for Rs329mn tax (disallowance of 52-W High / Low Rs.1,238 / Rs.454 depreciation on goodwill for tax deduction) Adj. PAT grew by 89.2% to Rs3.4bn Sensex / Nifty 50,540 / 15,175 Market Cap Rs.644bn/ $ 8,838m Shares Outstanding 626m Core segment/Lloyd grows by 55.9%/ 29% YoY: Switchgear Revenues/ EBIT 3M Avg. Daily Value Rs.3631.34m grew by 53.1%/ 84.2% to Rs4.6bn/ Rs1.2bn; margins expanded by 450bps to 26.6%. Cables Revenues/ EBIT grew by 50.8%/ 2.3x to Rs10.3bn/ Rs1.5bn; Shareholding Pattern (%) margins expanded by 510bps to 14.8%. Lighting Revenues /EBIT grew by Promoter’s 59.50 Foreign 24.91 40.3%/2.1x to Rs3.3bn/Rs680mn; margins expanded by 660bps to 20.7%. ECD Domestic Institution 7.89 Revenues/EBIT grew by 70.6%/94.8% to Rs7.1bn/Rs1.1bn; margins expanded by Public & Others 7.70 Promoter Pledge (Rs bn) - 190bps to 15.3%. Lloyd Revenues/EBIT grew by 29%/3.7x YoY to Rs5.9b/Rs318mn, while margins expanded by 350bps YoY to 5.4%. Stock Performance (%) 1M 6M 12M Concall Takeaways: 1) April started off well across product categories before 2nd Absolute 2.3 24.6 120.7 Relative (3.4) 8.2 35.1 Covid wave halted momentum 2) Price hikes taken in 3Q/4Q to fully reflect in coming quarters. Margins to stabilize by 2Q/3Q. Price elasticity not very high 3)
Industrial and Infra portfolio started exhibiting growth since Jan. 4) 2-years Capex Amnish Aggarwal [email protected] | 91-22-66322233 target of Rs10bn. Will add capacity in most product categories 5) 4Q cables margins Paarth Gala aided by pricing action and low cost inventory. Will stabilize in coming quarters 6) [email protected] | 91-22-66322242 Lloyd likely to have gained significant RAC market share in FY21. Only player to have grown in FY21 7) Washing Machine and Refrigerators likely to be growth avenues. RAC will continue to benefit from Make in India and export opportunities
May 21, 2021 1 Havells India
Q4FY21 Result Overview (Rs mn): Sales grew by 50.3% YoY; Adj. PAT grew by 89.2% YoY Y/e March Q4FY21 Q4FY20 YoY gr. (%) Q3FY21 FY21 FY20 YoY gr. (%) Net Sales 33,312 22,161 50.3 31,659 1,04,279 94,292 10.6 Operating & Manufacturing Expenses 20,841 14,146 47.3 19,592 64,749 58,351 11.0 % of Net Sales 62.6 63.8 61.9 62.1 61.9 Gross Profit 12,471 8,016 55.6 12,067 39,530 35,941 10.0 % of Net Sales 37.4 36.2 38.1 37.9 38.1 Personnel Cost 2,585 1,989 30.0 2,358 8,853 8,996 (1.6) % of Net Sales 7.8 9.0 7.4 8.5 9.5 Other Expenses 4,829 3,573 35.1 4,628 15,024 16,671 (9.9) % of Net Sales 14.5 16.1 14.6 14.4 17.7 Total Expenditure 28,255 19,708 43.4 26,578 88,627 84,018 5.5 EBITDA 5,057 2,453 106.1 5,081 15,653 10,274 52.4 Margin (%) 15.2 11.1 16.0 15.0 10.9 Other income 372 195 90.5 392 1,450 1,120 29.5 Depreciation 650 625 4.0 644 2,489 2,179 14.2 EBIT 4,779 2,023 136.2 4,829 14,614 9,215 58.6 Interest 235 46 410.9 152 726 197 268.4 PBT before exceptional item 4,544 1,977 129.8 4,677 13,888 9,017 54.0 Total Taxes 1,191 205 480.6 1,186 3,590 1,687 112.8 ETR (%) 26.2 10.4 25.4 25.8 18.7 Adj. PAT 3,352 1,772 89.2 3,491 10,298 7,330 40.5 PAT 3,023 1,772 70.6 3,491 10,396 7,330 41.8 Source: Company, PL
Segmental Breakup (Rs mn): Core segment grew by 55.9%; Lloyd grew by 29%; Margins expand across segments Y/e March Q4FY21 Q4FY20 YoY gr. (%) Q3FY21 FY21 FY20 YoY gr. (%) Revenues Switchgears 4,633 3,027 53.1 4,371 14,609 13,394 9.1 Cables 10,292 6,823 50.8 9,052 31,802 29,942 6.2 Lighting & Fixtures 3,287 2,343 40.3 3,533 10,846 10,143 6.9 Electrical Consumer Durables 7,124 4,177 70.6 7,831 23,770 20,054 18.5 Others 2,070 1,213 70.7 1,757 6,365 4,857 31.1 Core Revenues 27,406 17,582 55.9 26,543 87,392 78,389 11.5 Lloyd 5,906 4,579 29.0 5,116 16,888 15,903 6.2
EBIT Switchgears 1,234 670 84.2 1,372 4,047 3,249 24.5 EBIT margin (%) 26.6 22.1 31.4 27.7 24.3 Cables 1,528 666 129.3 1,026 4,038 3,321 21.6 EBIT margin (%) 14.8 9.8 11.3 12.7 11.1 Lighting & Fixtures 680 329 106.7 811 2,041 1,457 40.1 EBIT margin (%) 20.7 14.0 23.0 18.8 14.4 Electrical Consumer Durables 1,090 560 94.8 1,405 4,037 2,870 40.7 EBIT margin (%) 15.3 13.4 17.9 17.0 14.3 Others* 145 -13 NM 70 310 (250) NM EBIT margin (%) 7.0 -1.1 4.0 4.9 -5.1 Core EBIT 4,676 2,211 111.4 4,686 14,472 10,647 35.9 EBIT margin (%) 17.1 12.6 17.7 16.6 13.6 Lloyd 318 85 272.7 309 741 -401 NM EBIT margin (%) 5.4 1.9 6.0 4.4 -2.5 Source: Company, PL *Pumps, Motors, Personal Grooming, Water Purifiers, Solar
May 21, 2021 2 Havells India
Financials
Income Statement (Rs m) Balance Sheet Abstract (Rs m) Y/e Mar FY20 FY21 FY22E FY23E Y/e Mar FY20 FY21 FY22E FY23E Net Revenues 94,292 1,04,279 1,15,725 1,36,724 Non-Current Assets YoY gr. (%) (6.3) 10.6 11.0 18.1 Cost of Goods Sold 58,351 64,749 72,087 84,741 Gross Block 40,646 42,543 46,919 51,807 Gross Profit 35,941 39,530 43,639 51,982 Tangibles 28,373 30,175 34,451 39,239 Margin (%) 38.1 37.9 37.7 38.0 Intangibles 12,273 12,368 12,468 12,568 Employee Cost 8,996 8,853 9,547 10,938 Other Expenses 8,204 12,395 9,002 10,544 Acc: Dep / Amortization 10,256 12,745 14,625 17,132 Tangibles 9,378 11,568 13,138 15,332 EBITDA 10,274 15,653 16,410 19,835 Intangibles 878 1,177 1,487 1,800 YoY gr. (%) (13.2) 52.4 4.8 20.9 Margin (%) 10.9 15.0 14.2 14.5 Net fixed assets 30,390 29,798 32,295 34,675 Tangibles 18,994 18,607 21,314 23,907 Depreciation and Amortization 2,179 2,489 2,715 2,985 Intangibles 11,395 11,191 10,981 10,768
EBIT 8,095 13,164 13,695 16,850 Capital Work In Progress 861 899 1,000 1,000 Margin (%) 8.6 12.6 11.8 12.3 Goodwill 3,105 3,105 3,105 3,105 Non-Current Investments 230 216 226 236 Net Interest 197 726 552 517 Net Deferred tax assets (2,865) (3,391) (3,317) (3,225) Other Income 1,120 1,450 1,724 2,072 Other Non-Current Assets 1,357 1,313 1,493 1,555
Profit Before Tax 9,017 13,888 14,868 18,406 Current Assets Margin (%) 9.6 13.3 12.8 13.5 Investments - 3,063 2,563 2,563 Inventories 18,719 26,199 25,364 28,094 Total Tax 1,687 3,590 3,821 4,730 Trade receivables 2,409 5,603 5,707 5,619 Effective tax rate (%) 18.7 25.8 25.7 25.7 Cash & Bank Balance 11,069 16,247 22,165 28,772 Other Current Assets 1,646 1,092 1,736 2,051 Profit after tax 7,330 10,298 11,047 13,675 Total Assets 70,479 88,202 96,216 1,08,305 Minority interest - - - - Share Profit from Associate - - - - Equity Equity Share Capital 626 626 626 626 Adjusted PAT 7,330 10,298 11,047 13,675 Other Equity 42,422 51,019 59,874 68,854 YoY gr. (%) (6.9) 40.5 7.3 23.8 Total Networth 43,048 51,645 60,500 69,480 Margin (%) 7.8 9.9 9.5 10.0 Extra Ord. Income / (Exp) - 98 - - Non-Current Liabilities Long Term borrowings - 3,937 3,137 2,337 Reported PAT 7,330 10,396 11,047 13,675 Provisions 356 584 463 547 YoY gr. (%) (6.9) 41.8 6.3 23.8 Other non current liabilities 220 46 45 47 Margin (%) 7.8 10.0 9.5 10.0 Current Liabilities Other Comprehensive Income - - - - ST Debt / Current of LT Debt - - - - Total Comprehensive Income 7,330 10,396 11,047 13,675 Trade payables 14,141 15,968 17,380 20,431 Equity Shares O/s (m) 626 626 626 626 Other current liabilities 8,940 11,604 10,424 11,240 EPS (Rs) 11.7 16.5 17.6 21.8 Total Equity & Liabilities 70,479 88,202 96,216 1,08,305 Source: Company Data, PL Research Source: Company Data, PL Research
May 21, 2021 3 Havells India
Cash Flow (Rs m) Key Financial Metrics
Y/e Mar FY20 FY21 FY22E FY23E YearY/e Mar FY20 FY21 FY22E FY23E
PBT 9,017 13,888 14,868 18,406 Per Share(Rs) Add. Depreciation 2,179 2,489 2,715 2,985 EPS 11.7 16.5 17.6 21.8 Add. Interest 197 726 552 517 CEPS 15.2 20.4 22.0 26.6 Less Financial Other Income 1,120 1,450 1,724 2,072 BVPS 68.8 82.5 96.6 111.0 Add. Other (533) (824) (434) (37) FCF 7.4 8.1 14.3 20.2 Op. profit before WC changes 10,860 16,279 17,700 21,870 DPS 4.0 6.5 7.5 9.2 Net Changes-WC (215) (6,985) 393 844 Return Ratio(%) Direct tax (2,398) (2,714) (3,821) (4,730) RoCE 21.6 29.6 25.9 27.9 Net cash from Op. activities 8,248 6,579 14,273 17,984 ROIC 20.8 32.5 29.2 34.4 Capital expenditures (3,592) (1,536) (5,312) (5,365) RoE 17.3 21.8 19.7 21.0 Interest / Dividend Income 625 894 - - Balance Sheet Others (2,509) (6,987) 6,500 - Net Debt : Equity (x) (0.3) (0.3) (0.4) (0.4) Net Cash from Invt. activities (5,477) (7,629) 1,188 (5,365) Net Working Capital (Days) 27 55 43 35 Issue of share cap. / premium 242 98 - - Valuation(x) Debt changes (937) 4,233 (800) (800) PER 87.8 62.5 58.3 47.1 Dividend paid (6,413) (1,878) (2,191) (4,695) P/B 14.9 12.5 10.6 9.3 Interest paid (52) (559) (552) (517) P/CEPS 67.7 50.3 46.8 38.6 Others - - - - EV/EBITDA 61.6 40.1 37.9 31.0 Net cash from Fin. activities (7,159) 1,894 (3,543) (6,012) EV/Sales 6.7 6.0 5.4 4.5 Net change in cash (4,388) 845 11,918 6,607 Dividend Yield (%) 0.4 0.6 0.7 0.9 Free Cash Flow 4,655 5,044 8,961 12,619 Source: Company Data, PL Research Source: Company Data, PL Research
Quarterly Financials (Rs m) Y/e Mar Q1FY21 Q2FY21 Q3FY21 Q4FY21 Net Revenue 14,791 24,518 31,659 33,312 YoY gr. (%) (45.5) 9.9 39.5 50.3 Raw Material Expenses 9,661 14,655 19,592 20,841 Gross Profit 5,131 9,862 12,067 12,471 Margin (%) 34.7 40.2 38.1 37.4 EBITDA 1,309 4,207 5,081 5,057 YoY gr. (%) (52.9) 79.0 88.9 106.1 Margin (%) 8.8 17.2 16.0 15.2 Depreciation / Depletion 604 591 644 650 EBIT 705 3,616 4,437 4,407 Margin (%) 4.8 14.7 14.0 13.2 Net Interest 167 173 152 235 Other Income 322 364 392 372 Profit before Tax 860 3,808 4,677 4,544 Margin (%) 5.8 15.5 14.8 13.6 Total Tax 226 987 1,186 1,191 Effective tax rate (%) 26.3 25.9 25.4 26.2 Profit after Tax 633 2,821 3,491 3,352 Minority interest - - - - Share Profit from Associates - - - - Adjusted PAT 633 2,821 3,491 3,352 YoY gr. (%) (64.0) 56.5 75.0 89.2 Margin (%) 4.3 11.5 11.0 10.1 Extra Ord. Income / (Exp) - 428 - (330) Reported PAT 633 3,249 3,491 3,023 YoY gr. (%) (64.0) 80.2 75.0 70.6 Margin (%) 4.3 13.3 11.0 9.1 Other Comprehensive Income - - - - Total Comprehensive Income 633 3,249 3,491 3,023 Avg. Shares O/s (m) 626 626 626 626 EPS (Rs) 1.0 4.5 5.6 5.4 Source: Company Data, PL Research
May 21, 2021 4 Havells India
Price Chart Recommendation History
(Rs) No. Date Rating TP (Rs.) Share Price (Rs.) 1225 1 06-Apr-21 Hold 1,128 1,026
1034 2 21-Jan-21 Hold 1,126 1,131 3 08-Jan-21 UR - 971 842 4 29-Oct-20 Hold 700 725
651 5 06-Oct-20 Reduce 571 688 6 27-Jul-20 Reduce 524 595 459 7 07-Jul-20 Reduce 521 598
Nov -18 Nov
Nov -19 Nov
Nov -20 Nov
May -18 May
May -19 May
May -20 May May -21 May
Analyst Coverage Universe Sr. No. Company Name Rating TP (Rs) Share Price (Rs) 1 Asian Paints BUY 3,136 2,556 2 Avenue Supermarts BUY 3,360 2,896 3 Bajaj Electricals BUY 1,033 991 4 Britannia Industries Accumulate 3,755 3,541 5 Burger King India BUY 221 145 6 Colgate Palmolive Accumulate 1,794 1,597 7 Crompton Greaves Consumer Electricals BUY 447 374 8 Dabur India Hold 531 535 9 Emami BUY 568 507 10 GlaxoSmithKline Consumer Healthcare Hold 9,377 9,247 11 Havells India Hold 1,128 1,026 12 Hindustan Unilever BUY 2,562 2,408 13 ITC BUY 248 214 14 Jubilant FoodWorks Accumulate 3,279 2,862 15 Kansai Nerolac Paints Accumulate 620 566 16 Marico Accumulate 452 410 17 Nestle India Accumulate 18,450 17,096 18 Pidilite Industries Hold 1,819 1,880 19 Polycab India BUY 1,480 1,376 20 Titan Company Accumulate 1,663 1,507 21 Voltas Hold 955 999 22 Westlife Development BUY 572 420
PL’s Recommendation Nomenclature (Absolute Performance) Buy : > 15% Accumulate : 5% to 15% Hold : +5% to -5% Reduce : -5% to -15% Sell : < -15% Not Rated (NR) : No specific call on the stock Under Review (UR) : Rating likely to change shortly
May 21, 2021 5 Havells India
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