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Systematix Reserach Report
Havells India Ltd.'s ~5% profit after tax beat in Q4 FY23 was driven by superior Ebitda margin (led by switchgear), while the company reported in line revenue (up 10% YoY).
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Healthy traction in business-to-business channels (switchgears, cables, professional lighting, etc.) continued, while high inflation continued to hurt retail demand. Electrical consumer durable revenue (down 14% YoY) disappointed on high channel stocking of fans (60-65% segment mix) in Q3.
Lloyd focused on market share (up 32% YoY at Rs 12.7 billion) over margins (Rs 229 million Ebit loss in Q4; Rs 2.2 billion loss in FY23) and maintained its top three status as an air conditioner player. We expect margins to expand gradually in Lloyd, given its upfront investments in brand building, distribution set up and new launches.
We have maintained our estimates post Q4, and estimate 13%/30%/33% compound annual growth rate in revenue/Ebitda/profit after tax over FY23-25E (16%/9%/10% over FY18-23), respectively, likely to be driven by growth and margin expansion in all segments.
Robust operating cash flow will be utilised for capex in future, which will aid in generating strong 22% return on equity and 37% return on invested capital in FY25E.
While Havells' long-term prospects seem healthy, at 41 times FY25E price/equity, the stock is fairly valued.
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