Havells (Q4 FY13)

India Infoline News Service | Mumbai |

We expect strong growth in revenues for the standalone business to continue over FY13-15 coupled with steady expansion in OPM

CMP Rs716, Target Rs805, Upside 12.4% 
  • Net sales for Q4 FY13 at standalone level stood at Rs11.6bn, a healthy growth of 11.6% on yoy basis. Revenues from Electrical Consumer Durables segment grew by 18% on yoy basis for Q4 FY13 led by jump in revenues from new launches. Revenues from Switchgear and Lighting & Fixture segment witnessed 31.2% and 20.6% yoy growth respectively. Industrial slowdown impacted the cables and wires division with revenue declining by 3.1% yoy during the quarter. 
  • Operating profit margin of the standalone business for Q4 FY13 contracted by 127bps on yoy basis on account of increase in raw material cost as % of sales by 236bps over the same period.  First year of operation for REO switches dragged the EBIT margin for the Switchgears division by ~3.3pps on yoy basis.  Electrical Consumer Durables and Lighting & Fixtures divisions reported 115bps and 24bps decline in margins for Q4 FY13. Overall blended EBIT margin contracted by 88bps on yoy basis. 
  • Revenues (€ terms) from its overseas subsidiary (Sylvania) grew modestly by 1% yoy, with decline of 4.7% in Latin American market and European region registering a revenue decline of 0.9% Sequentially, overall revenues for Sylvania were up by 3%. Operating profit margin for Sylvania stood at 6.1%, decline of 239bps on yoy basis and 30bps 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% EBIDTA margins for FY14.
  • We expect strong growth in revenues for the standalone business to continue over FY13-15 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 maintain our BUY rating on the stock with a revised 9-month target price of Rs805.
Results table
(Rs m) Q4 FY13 Q4 FY12 % yoy Q3 FY13 % qoq
Net sales 11,696 10,485 11.6 10,584 10.5
Material costs (6,281) (5,878) 6.8 (5,529) 13.6
Purchase of traded goods (1,202) (889) 35.2 (1,070) 12.3
Personnel costs (416) (358) 16.5 (472) (11.8)
Other overheads (2,309) (1,893) 22.0 (2,151) 7.3
Operating profit 1,488 1,468 1.4 1,362 9.3
OPM (%) 12.7 14.0 (127) bps 12.9 (14) bps
Depreciation (156) (166) (6.0) (146) 6.7
Interest (27) (197) (86.5) (58) (53.7)
Other income 34 3 959.4 15 121.6
PBT 1,340 1,108 20.9 1,173 14.2
Tax (243) (193) 26.0 (227) 7.1
Effective tax rate (%) 18.1 17.4 - 19.3 -
Reported PAT 1,097 915 19.8 947 15.9
Adj. PAT margin (%) 9.4 8.7 65 bps 8.9 43 bps
Ann. EPS (Rs) 35.2 29.3 19.8 30.3 15.9
Source: Company, India Infoline Research

Cost analysis
As a % of net sales Q4 FY13 Q4 FY12 bps yoy Q3 FY13 bps qoq
Material costs 53.7 56.1 (236) 52.2 146
Purchase of traded goods 10.3 8.5 180 10.1 16
Personnel Costs 3.6 3.4 15 4.5 (90)
Other overheads 19.7 18.0 169 20.3 (58)
Total costs 87.3 86.0 127 87.1 14
Source: Company, India Infoline Research

Segmental results
(Rs mn) Q4 FY13 Q4 FY12 % yoy Q3 FY13 % qoq
Revenues




Switch Gears 3,118 2,376 31.2 2,697 15.6
Cables and Wires 4,620 4,767 (3.1) 4,085 13.1
Lighting & Fixtures 1,823 1,511 20.6 1,770 3.0
Electrical Consumer Durable 2,136 1,813 17.8 2,032 5.1
Total 11,696 10,467 11.7 10,584 10.5
EBIT




Switch Gears 977 823 18.7 950 2.9
Cables and Wires 279 424 (34.2) 414 (32.5)
Lighting & Fixtures 449 376 19.4 423 6.2
Electrical Consumer Durable 571 505 12.9 508 12.2
Total 2,276 2,129 6.9 2,295 (0.8)
EBIT Margin (%)




Switch Gears
BSE 550.75 [5.65] ([1.02]%)
NSE 551.50 [4.60] ([0.83]%)

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