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Havells India shares: Rs 1,075 or Rs 1,408, where is stock headed post Q3 results?

Havells India shares: Rs 1,075 or Rs 1,408, where is stock headed post Q3 results?

Havells India reported a 7.3 per cent drop in consolidated net profit to Rs 283.52 crore YoY for the quarter ended December 31, 2022, on account of higher raw material costs.

Havells India's stock plunged 6 per cent to Rs 1,136.40 on Friday after the announcement of Q3 earnings. Havells India's stock plunged 6 per cent to Rs 1,136.40 on Friday after the announcement of Q3 earnings.

Havells India's share plunged about 6 per cent during the early on Friday after the electrical appliance maker disappointed in the December 2022 quarter. The company had announced its quarterly earnings on Thursday and analysts tracking the stock remain mixed on the counter.

Havells India's stock plunged 6 per cent to Rs 1,136.40 on Friday after the announcement of Q3 earnings. However, the stock made a partial recovery as the session progressed. The stock had settled at Rs 1,206.30 on Thursday.

Havells India reported a 7.3 per cent drop in consolidated net profit to Rs 283.52 crore year on year (YoY) for the third quarter ended December 31, 2022, on account of higher raw material costs. It had posted a consolidated net profit of Rs 305.82 crore in the same quarter previous fiscal.

Havells India's consolidated revenue from operations during the quarter under review stood at Rs 4,127.57 crore, rising 13 per cent, against Rs 3,664.21 crore in the year-ago period, the company said in the regulatory filing. The cost of raw materials and components consumed stood at Rs 2,321.99 crore compared to Rs 2,089.59 crore in the year-ago period, it said.

Havells delivered an improved performance for 3QFY23, driven by significantly better margins in cable. However, EBITDA still fell 4 per cent YoY due to a post-Covid normalization in opex. Management said inflation is impacting consumer demand, and the recent spike in commodities rules out any price cuts near-term, said Kotak Institutional Equities.

"We cut FY2023-24E EPS by 5-8 per cent while leaving FY2025E largely unchanged. Maintain 'sell' with a revised Fair Value of Rs 1,075 amid expensive valuations and risk of downgrades to consensus EPS amid demand softness and likely only a gradual improvement in Lloyd margins," it said.

On the other hand, Phillip Capital said thay volatile consumer demand with reasonable demand from B2B may cap the growth. However, despite weak demand Havells has reported strong growth in Q3. "We expect consumer demand to pick up over next 3-6 months, and construction and capex cycle will support the growth," it said.

Phillip Capital expects improved distribution network; completion of appliances portfolio; and benefits from own domestic manufacturing and PLI – to drive a growth. Overall, It expects earnings CAGR of 18 per cent over FY22-25.

"We value Havells now on FY25 earnings and maintain premium valuation of 45x based on its strong brand, distribution, in-house manufacturing, market share gain, balance sheet, and cash flow, which will help it to ride out the tough environment," it added with a 'buy' call and a revised target price  of Rs 1,408, which was Rs 1,338 earlier.

"Havells has seen limited pick-up as pre-buying was more concentrated towards the economy segment. We mentioned that these are more channel adjustments and would not impact the end consumer demand," said HDFC Securities.  

Gross margins have seen 72/200bps YoY/QoQ improvement to 33 per cent. All segments have seen sequential contribution margin improvement as high-cost raw material inventory was largely absorbed by Q2FY23, it added with maintain 'add' rating and a target price of Rs 1,350.

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Published on: Jan 20, 2023, 11:06 AM IST
Posted by: Tarab Zaidi, Jan 20, 2023, 11:00 AM IST