Akash Jain, Vice President, Equity Research at Ajcon Global Services says, “We believe at current valuations, Havells India is fairly priced and has already discounted future growth. At current market price, we expect moderate upside unless there is some buoyant growth and improvement in margin profile.”
Historically, the company enjoyed significant premium in its valuations owing to its focus on premiumization, strong brand recall and investment in new product categories. The lower GST rates would also drive earnings growth for the Company.
In Q3FY18, earnings were in-line with our expectations. In Q3FY18, topline witnessed a rise of 31 percent and a similar jump in the profits also. The growth was mainly led by consumer durables and lighting and fixture segment which grew by 35 percent and 26 percent YoY respectively largely on account of water heaters, fans and LED segment witnessing strong growth.
The company’s switch gears segment which was under pressure to quite some time owing to increasing competition witnessed some revival with a growth of 4 percent YoY was driven by launch of new switches. Cables and wires business continues to be drag. The cables and wires volumes witnessed de-growth in December 2017 quarter.
The company is on a drive to improve its retail reach and is evident from the recent initiatives. Havells inaugurated its first retail outlet in Kanpur city. The company is planning to open 30 retail showrooms in Uttar Pradesh by 2020 and is looking to double its business in the state in the next 3-4 years.
"Uttar Pradesh is witnessing a steady improvement in power supply availability with renewed focus of the government to push power sector and allied infrastructure projects," Lloyd CEO Shashi Arora said.
The company has more than 50 Lloyd exclusive retail showrooms across India. The retail showrooms will offer wide ranges of energy efficient, ultra-modern and durable air conditioners, televisions and washing machines under one roof, Lloyd said. – Moneycontrol