Buy this large-cap electrical equipment stock for a potential gain of 12%, FY22 revenue is up 33%

1. Havells India Stock Outlook

The current market price of the share is Rs 1107 each. The stock hit a 52-week high of Rs 1504 and a 52-week low of Rs 977 each. The large-cap stock has returned 11.12% and returned 135% in 5 years. If investors buy the stock at the current market price of 1107, the stock can offer a potential gain of 12% with a target price of Rs 1245 each. Havells had declared a final dividend of Rs 4.50 per share and the ex-dividend date was June 14, 2022

Current market price Rs 1107
Target price Rs 1245
Potential gain 12%
52 week high Rs 1505
52 week low 97
1 year return 11%
Return on 5 years 135%
2. Growth of Havells in India

2. Growth of Havells in India

FY22 revenue grew 33% year-over-year, supporting healthy demand and higher realization. Revenue growth was broad-based across all product categories; Cables and Wires, Switches, Lighting and Consumer Durables and Other Products which grew 46%, 23%, 26%, 29% and 19% year-on-year, respectively. Lloyd’s turnover increased by 34%. . An overall recovery in the construction sector has been observed and this trend is expected to continue given the recovery in residential demand. In cables, B2B & B2C showed healthy growth. Durable consumer goods segments continue to experience strong growth; largely driven by fans.

3. Havells India EBITDA records growth

3. Havells India EBITDA records growth

FY22 EBITDA increased by 12% and margins decreased by 240 basis points to 12.7%. In Q4FY22, gross margins decreased by 800 basis points to 29.3%. Driven by cost rationalization, the decline in EBITDA margins was limited to 340 basis points at 11.8%. PAT increased 17% year-on-year, supported by higher other income. Going forward, revenue growth is expected to be stable, supported by strong B2B demand and a recovery in construction activities.

The EBITDA margin should gradually improve, driven by price increases. We are reducing our EBITDA margin estimates by 80 bps and 110 bps for FY23E and FY24E, given the current high cost of inputs. We expect PAT to grow by 22% in fiscal year 22-24E.

4. Havells India Valuation

4. Havells India Valuation

According to Geojit, “The current inflationary environment will remain in the near term, after which the margin will improve. Given its strong product portfolio, improved distribution, market share gains and healthy balance sheet, we expect HAVL to trade at a higher valuation.

Given a healthy 20% correction in the share price, we value HAVL at a P/E of 45x (historical average) on FY24E and move to BUY with a target price of Rs.1,245.”

5. About Havells India

5. About Havells India

Havells India Limited is a leading Fast Moving Electrical Goods (FMEG) company and a leading power distribution equipment manufacturer with a strong global presence. Havells enjoys market leadership in a wide range of products, including industrial and household circuit protection devices, cables and wires, motors, fans, modular switches, household appliances, air conditioners, electric water heaters, power capacitors, light fixtures for home, commercial, and industrial applications, according to its website. The current market capitalization of the company is Rs 69,429 crore.

Disclaimer

Disclaimer

The stock was featured in the Geojit Financial Services brokerage report. Greynium Information Technologies, the author and the respective brokerage are not responsible for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.