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Buy Havells India, target Rs 788: Anand Rathi

Buy Havells India Ltd. at a price target of Rs 788.

Last Updated: Jan 04, 2019, 05.11 PM IST
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Havells India
The current market price of Havells India is Rs 680.20.
Brokerage Anand Rathi has a buy call on Havells India with a target price of Rs 788.

The current market price of Havells India is Rs 680.20.

Time period given by the brokerage is one year when Havells India price can reach the defined target.

Investment rationale by the brokerage
In its latest quarterly results, Havells recorded net revenue growth of 23 per cent at Rs 21,909 million as against Rs 17,774 million in the same quarter the previous year. Net Profit increased 4 per cent to Rs 1,786 million from Rs 1,711million in the previous year quarter. While Lloyd’s performance was affected by adverse season, channel inventory and forex headwinds, all other key business segments reported solid double digits growth in the quarter.

Havells looks to drive growth with technology upgradation. Channel expansion remains one of the key strategic initiatives of the company, focused on modern format retails, brand stores and online platforms along existing relationships with distributors and direct dealers. With this, the company targets to grow all its four key product groups viz. Washing Machines, Refrigerators, Room AC and TVs in double digits.

In terms of guidance, management expects Cable and wire business margin in the range of 15 per cent to 17 per cent in the coming quarters, while the range for lighting is expected at about 27 per cent to 30 per cent. Post completion of the Lloyd plant, Capex is expected in the range of Rs 200-250 crores every year.

In terms of macro scenario, the consumer durables industry has plenty upside given Government’s focus on electrification, infrastructure and housing and implementation of GST. Also, the emerging middle class, increasing disposable income and easy access to credit are set to boost demand in the sector.

Havells, which boasts of around 8,500 dealers and 1,00,000 retailers in its business, aims to expand its major penetration zones -Metro, Tier I & II Towns, while it sees Rural sector and Tier III & below towns as key penetration opportunity.

With solid fundamentals and favourable macro traits, we believe the company is well positioned for long-term growth and initiate our coverage on Havells India Ltd. with a BUY rating and a target price of Rs 788 per share.

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