Havells

24 May

Gaining market share due to shift from unorganized to organized sector- HAVELLS

Update on the Indian Equity Market:

 

On Monday, Nifty closed 0.2% higher at 15,198. Within NIFTY50, IOC (+4.9%), BPCL(+2.8%), and SBIN(+2.4%) were top gainers, while SHREECEM (-2.5%),JSWSTEEL(-2.3%), and TATASTEEL (-1.9%) were the top losing stocks. Among the sectoral indices, PSU BANK (+2.1%), REALTY (+1.4%), and MEDIA (+1.2%) were the highest gainers, while METAL (-0.6%) and FMCG (-0.3%) were the only losing sectors.

 

Gaining market share due to shift from unorganized to organized sector- HAVELLS

 

Excerpts of an interview with Mr. Anil Rai Gupta, CMD, Havells India (HAVELLS), aired on CNBC-TV18 on 21stMay 2021:

  • HAVELLS reported a strong performance in 4QFY21. Even 1QFY22E started off well with continued growth momentum but has been hampered as the covid-19 second wave progressed. Mr. Gupta believes that things should start looking up fromJune 2021.
  • HAVELLS margins contracted 80 bps in 4QFY21. Any movement in raw material costs is passed on with a bit of lag. Due to the sharp increase in raw material costs in 2HFY21, the lag has been longer which led to margin contraction in some categories. As raw material prices start stabilizing, Mr. Gupta expects the margins to normalize by 2QFY22E.
  • HAVELLS made foray into rural India only a couple years back. They have expanded distribution that resulted in 100% growth for the segment in FY21. Rural sales now form 4-5% of overall sales. Rural India is in stress right now but Mr. Gupta still expects it to be an area of big growth potential for HAVELLS.
  • Post the 1QFY21 lockdown, consumer products (contributes to 75% of total revenues)saw good growth in 2QFY21 and 3QFY21. Industrial products segment reported revenue decline in the same period and only started growing in 4QFY21. Mr. Gupta believes that the industrial and infra segment should come back to normalized levels post the current lockdown.
  • Within the consumer products segment, the growth in FY21 largely came from electrical products such as fans, domestic appliances, and personal grooming appliances. As housing sales started improving from 3QFY21, installation products like switches and sockets also started growing.
  • Covid-19 led disruption has been an opportunity for HAVELLS to gain market share from unorganized sector. Mr. Gupta expects to see more benefits on market share post the 2nd
  • HAVELLS sawa lot of restructuring on operating costs and improvement on the technology side in FY21. As some cost savings are sustainable, going ahead Mr. Gupta expects there will be margin expansion compared to FY20.

Asset Multiplier Comments

  • Raw material cost inflation has affected the entire spectrum of sectors and thus companies have taken a hit on their margins. Many companies have taken a cautious approach in taking price hikes as the demand scenario is a little sensitive currently.
  • As companies start taking the required price hikes gradually, margin profiles are expected to improve.
  • Post the lockdowns in FY21, there was a big spike in consumer spending as there was pent up demand in the market. Whether that phenomenon repeats and if it does, will it be to the same extent remains to be seen.

Consensus Estimate (Source: investing. com and market screener websites)

  • The closing price of HAVELLSwas ₹ 1,016as of 24-May-2021. It traded at 55x/ 46x the consensus EPS estimate of ₹ 18.5/22.1 for FY22E/ FY23E respectively.
  • The consensus target price of ₹ 1,071/- implies a PE multiple of 49x on FY23E EPS of ₹22.1/-.

 

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

 

By Havells , , 0 Comments Read more...
31 Dec

Increasing commodity prices a concern – Havells India

Update on the Indian Equity Market:
On Wednesday, NIFTY closed at 13,981 (-0.3%). The top gainers in NIFTY50 were Ultratech Cement (+4.4%), Grasim (+3.0%), and Shree Cement (+3.0%). The top losers were IndusInd Bank (-1.5%), Sun Pharma (-1.1%), and Axis Bank (-1.0%). The top sectoral gainers were AUTO (+1.3%), METAL (+1.3%), and REALTY (+1.3%) and the sectoral losers were PSU BANK (-0.2%), PAHRMA (-0.1%), and PVT BANK (-0.1%).

Excerpts of an interview with Mr. Anil Rai Gupta, CMD – Havells India with CNBC TV18 dated 29th December 2020:
• Havells has recovered from the lows and is up almost 80 per cent from the March lows. The demand is holding up from B and C grade towns. There is also a shift from unorganized to organized players.
• There is an improvement in the residential sector and there is some revival in the industrial and infra portfolio. He expects the rising commodity prices to be a dampener.
• Commodity price increase has to be passed on because the increase has been sharp. But it does dampen two things. One, there will be pressure on margins and secondly, if this sustains, people will have the option to postpone their purchases even in the construction sector.
• So there will be a little bit of stress if this continues.
• He believes that the government move to boost manufacturing is a step in the right direction. The government has realized that the next big source of job creation will be manufacturing and the government is taking the right steps.
• They have chosen many industries for a production-linked incentive (PLI) and they are looking at increasing investments in both lighting and air conditioning with the new PLI.
• They have invested constantly, at least Rs 300-500 crore in CAPEX every year. Going forward they anticipate a similar CAPEX would continue; maybe a bit more so – maintenance CAPEX and the other divisions and high CAPEX in the air conditioning and the lightings space.
• But they definitely see that going forward they will be looking at continued CAPEX even in the coming times.
• They have seen a gain in market share post lockdown.

Consensus Estimate: (Source: market screener and investing.com websites)
The closing price of HAVELLS was ₹ 902/- as of 30-December 2020. It traded at 68x/ 59x/ 50x the consensus earnings estimate of ₹ 13.2/ 15.4/ 18.2 for FY21E/FY22E/23E respectively.
The Consensus price target of HAVELLS was ₹ 743/- as of 30-December-2020. It trades at 41x of FY23E EPS estimate of ₹18.2/-.
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Consumer durable, Havells 0 Comments Read more...
24 Jul

A tremendous shift to mindful shopping seen – Havells India

Update on the Indian Equity Market:

On Thursday, Nifty50 ended 0.7% higher at 11,215 after reports citing India and the US are close to inking a trade deal. EICHERMOT (+4.9), ICICIBANK (+3.6%), and RELIANCE (+3.6%) topped the gainers. AXISBANK (-3.8%), SHREECEM (-1.9%), and HINDUNILVR (-1.4%) led the laggards. PHARMA (+1.4%), REALTY (+1.4%), and AUTO (+1.4%) led the sectoral gainers while IT (-0.2%) was the only sector to end the day in the red.

The buying pattern of consumers has undergone a transformation since the pandemic started and businesses have had to device new strategies to get consumers back. Mr. Ravindra Singh Negi, President, ECD (Electrical Consumer Durables), Havells India talked about the company’s online to offline model with Economic Times.

Here are the edited excerpts of the interview published on 22nd July 2020:

  • The online to offline program combines technology and execution at the local level. This model provides a solution to customers worried about going out and partners concerned about sales. Products can be selected, and payment made online and delivery is made at a fast pace by local channels.
  • The launch of the beta version of the program led to a 4 times surge in the average monthly revenue generated by the e-store. The response led to the program being rolled out across the country in June, except for in Kolkata and Maharashtra.
  • Cognizant of the potential of digital power, Havells has made the swift movement to online sales and invested in the e-store for the brand at large. The hybrid model will be integral to business recovery as it aims to remove customers’ hesitance to go and shop offline due to health and safety concerns.
  • There has been a profound impact of the Covid-19 on the business due to the dependence on domestic consumption. April was a washout and May witnessed little recovery. June was better than the previous two months with a considerable contribution from smaller towns and semi-urban geographies. Although semi-urban and rural are almost back to normal, urban centers will take a while to get back on track.
  • Customer behavior has settled into the new normal significantly and there has been a tremendous shift to mindful shopping. There has been an uptake of domestic appliances such as air fryers, mixers, juicers, and blenders as these seem to invade the essentials category.
  • With the spas and salons shut for a long time, the grooming products too are high on the consumers’ shopping list. Beard trimmers sale has seen a spike of 5x.
  • Consumers are going to look at buying safe and quality products with superior after-sale service, which adds brand recall and loyalty. During the lockdown, more than half of their service issues were solved digitally through video calls or through do-it-yourself videos on their social media channels, which was appreciated by consumers.
  • The pandemic has revamped the business structure altogether. The focus remains on ramping up Make in India capabilities to offer better quality products to customers.

Consensus Estimate: (Source: market screener website)

  • The closing price of Havells India was ₹ 608/- as of 23-July-2020. It traded at 68x/ 42x/ 38x the consensus earnings estimate of ₹ 8.9/14.4/16.2 per share for FY21E/ FY22E/ FY23E respectively.
  • The consensus target price of ₹ 547/- implies a PE multiple of 34x on FY23E EPS of ₹ 16.2/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

 

By Consumer durable, Havells , 0 Comments Read more...