Havells reported stronger Q1FY22 than consensus estimates. In-spite of steep inflationary pressures, the firm was in a position to boost gross margin by 90bps
YoY due to (1) far better income mix, (2) selective price tag hikes across segments and (3) price saving initiatives. The firm has gained market place shares in most segments (our view) as its price tag hikes had been somewhat reduced than unorganised/smaller sized players. Ahead, we model recovery in revenues/ profitability of Lloyd which was impacted due to lockdown in essential summer season season. We model Havells to report PAT CAGR of 19.3% more than FY21-FY23E with: (1) robust volume development, (2) price tag hikes in higher single digits and (3) rewards of price saving initiatives and recovery in Lloyd. We stay structurally positive on the firm due to its competitive benefits and development chance in customer durables. Maintain Purchase with a DCF-based target price tag of Rs 1,320 (56x FY23E Earlier TP-Rs 1,198).
Q1FY22 overall performance: Havells reported income, EBITDA and PAT development of 75.9%, 170.% and 268.5%, respectively, YoY. Two-year income and PAT CAGR had been -2% and 15.3%, respectively. We think (1) robust customer off-take, (2) market place share gains from smaller sized/ unorganized players, (3) mid-higher single digit price tag hikes across solutions and (4) favorable base helped to report robust income development. Gross and EBITDA margins expanded 90bps and 470bps, respectively due to timely price tag hikes and price saving initiatives.
Strong development across segments: Segment-sensible income development prices had been as follows: Switchgears 98.4%, Cables 75.%, Lighting & fixtures 50.7%, Electrical customer durables 91% and Lloyd Consumer 62.5%. While there is robust customer off-take, revival in Government and private capex is also top to robust development of Industrial and Infrastructure portfolio.
Better income mix and acceptance of price tag hikes by customers: Switchgears segment which has highest EBIT margin reported 98.4% income development top to all round margin improvement. We also think the price tag hikes by Havells are largely accepted by the trade/customers with negligible influence on off-take.