Havells India: Recommendation Review

We had recommended Havells India in DSIJ Vol. 26, Issue No. 9 (dated April 11-24, 2011), when the scrip was trading at Rs 386. Our recommendation was backed by expectations of better growth from the electrical consumer durables segment and the switch gear segment. The major factor, though, was the better performance of Sylvania. A drag on the company’s consolidated performance for quite some time, it was expected to turn around. We reviewed the scrip again in DSIJ Vol. 26, Issue No. 22 (dated October 10-23, 2011), when it was trading at Rs 354. At that time, despite the fact that the scrip was trading below the recommended levels, we had asked our readers to hold onto it.

After a good financial performance in Q3 FY12, the scrip has witnessed an upmove and is trading at Rs 485. In Q3 FY12, the consolidated revenues were up by 16 per cent to Rs 1660 crore and the EBITDA also increased by 38 per cent to Rs 176 crore. As expected, the electrical consumer durables segment has been a major revenue driver. The cash flow at the end of 9M FY12 stood at Rs 78.90 crore. The capex for 9M FY12 stood at Rs 98 crore. The company’s total debt as on 31st December, 2011 has reduced to Rs 87 crore from Rs 151.30 crore in December 2010.

Currently, the scrip is trading at Rs 500. As it has achieved the target, we feel that booking profits seems like a prudent strategy.