Havells India hits fresh record high in weak market, surges 32% in a month

shares traded 7 per cent higher to hit a fresh record high of Rs 1,190 on the BSE in an otherwise weak market on Thursday, on expectation of higher growth in the next few quarters due to a low base (lockdown quarters) and effect of price hikes. The fast moving electrical goods company’s stock has surpassed its previous high of Rs 1,164, touched on January 22.

In the past one month, has rallied 32 per cent, after the company reported a strong set of numbers for the quarter ended December 2020 (Q3FY21) with standalone net profit jumping 75 per cent year on year (YoY) to Rs 349 crore, on the back of strong revenue growth. In comparison, the S&P BSE Sensex was down 1 per cent during the same period.

Ebitda (earnings before interest, taxes, depreciation, and amortization) margins expanded by 420 basis points (bps) at 16 per cent from 11.8 per cent in the corresponding quarter of previous fiscal. The company’s revenue during the quarter increased by 40 per cent YoY at Rs 3,166 crore. The double digit sales growth came after a gap of seven quarters and on a favourable base (3QFY20 had seen 10 per cent YoY de-growth in sales).

The company’s management said the encouraging business performance with secular growth across divisions and regions was led by improvement in consumer sentiment, festive season and reduction in Covid-19 cases and increased penetration in smaller towns and a higher rural reach. The supply chain disruption faced by suppliers with high import dependence has further supported market share gains, it said.

“The company’s Ebitda margin profile is likely to sustain at 14 per cent-16 per cent led by operating leverage as well as lower ad-spends and other expenses as a percentage of sales (even though they could rise in absolute terms). Havells intends to aggressively scale up overseas sales by becoming a manufacturing partner of large global brands (only in export markets). Factoring in higher value growth, better margin profile and international growth opportunities, we increase our FY21E-FY23E earnings estimates in 32 per cent- 40 per cent range,” analysts at Nirmal Bang Equities said.

“Havells is also keen to benefit from the Production Linked Incentive (PLI) scheme for export of ACs, lighting, etc. Also, it has tied up with a global company to export switchgear. Complete product offerings (ACs, washing machines, LED TVs, refrigerators, etc), network expansion and in-house production support our belief in bright prospects ahead for Lloyd”, according to analysts at Anand Rathi Share and Stock Brokers.

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