Havells (Q3 FY13)

India Infoline News Service | Mumbai |

Operating profit margin of the standalone business for Q3 FY13 contracted by 112bps on yoy basis on account of increase in raw material cost as % of sales by 200bps over the same period.

CMP Rs648, Target Rs750, Upside 15.7%

  • Net sales for Q3 FY13 at standalone level stood at Rs10.6bn, a robust growth of 18.1% on yoy basis. Revenues from Electrical Consumer Durables segment surge by 51% on yoy basis for Q3 FY13 led by a) 30% increase in revenues from fans and b) jump in revenues from new launches to Rs720mn in Q3 FY13 against Rs360mn in Q3 FY12. Revenues from Switchgear and Lighting & Fixture segment witnessed 19.3% and 22.2% yoy growth respectively. Industrial slowdown impacted the revenues of cables and wires division with growth slowing down to paltry 4.6% yoy during the quarter. 
  • Operating profit margin of the standalone business for Q3 FY13 contracted by 112bps on yoy basis on account of increase in raw material cost as % of sales by 200bps over the same period.  At segmental level, EBIT margin for the Switchgears division contracted sharply by ~4.3pps on yoy basis.  Electrical Consumer Durables and Lighting & Fixtures divisions reported 231bps and 392bps decline in margins for Q3 FY13. Overall blended EBIT margin contracted by 117bps on yoy basis. 
  • Revenues (€ terms) from its overseas subsidiary (Sylvania) de-grew by 3.5% yoy, with European region registering a revenue decline of 7.5%. Latin American market was adversely impacted on account of slowdown in Brazil. Sequentially, overall revenues for Sylvania were flat. Operating profit margin for Sylvania stood at 6.4%, decline of 337bps on yoy basis and expansion of 308bps sequentially. Slowdown in Europe and Brazil coupled with higher raw material cost and adverse product mix were the key factors for decline in margins for the quarter. The company has guided for 6-6.5% EBIDTA margins for FY14.
  • We expect strong growth in revenues for the standalone business to continue over FY12-15 coupled with steady expansion in OPM. For Sylvania, we expect revenue to report flattish growth and expect 6% OPM for next two years. We retain our positive stance for the fundamentals of the company in the long term. We upgrade rating on the stock to BUY with a revised 9-month target price of Rs750.
Results table
(Rs m) Q3 FY13 Q3 FY12 % yoy Q2 FY13 % qoq
Net sales 10,584 8,962 18.1 9,642 9.8
Material costs (5,529) (4,500) 22.9 (4,848) 14.1
Purchase of traded goods (1,070) (874) 22.5 (1,040) 2.9
Personnel costs (472) (364) 29.6 (433) 9.0
Other overheads (2,151) (1,970) 9.2 (2,129) 1.0
Operating profit 1,362 1,254 8.6 1,192 14.3
OPM (%) 12.9 14.0 (112) bps 12.4 51 bps
Depreciation (146) (104) 41.3 (159) (7.8)
Interest (58) (69) (16.4) (99) (42.2)
Other income 15 1 992.9 20 (21.5)
Extra ordinary items - (135)   101  
PBT 1,173 948 23.8 1,054 11.3
Tax (227) (179) 26.9 (185) 22.8
Effective tax rate (%) 19.3 18.9 - 17.5 -
Reported PAT 947 769 23.1 870 8.8
PAT margin (%) 8.9 8.6 37 bps 9.0 -8 bps
Ann. EPS (Rs) 30.3 24.6 23.1 27.9 8.8
Source: Company, India Infoline Research

Cost analysis
As a % of net sales Q3 FY13 Q3 FY12 bps yoy Q2 FY13 bps qoq
Material costs 52.2 50.2 202 50.3 196
Purchase of traded goods 10.1 9.8 36 10.8 (68)
Personnel Costs 4.5 4.1 39 4.5 (3)
Other overheads 20.3 22.0 (166) 22.1 (176)
Total costs 87.1 86.0 112 87.6 (51)
Source: Company, India Infoline Research

Segmental results
(Rs mn) Q3 FY13 Q3 FY12 % yoy Q2 FY13 % qoq
Revenues          
Switch Gears 2,697 2,260 19.3 2,551

***Note: This is a NSE Chart

 

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