Havells India : Maintain BUY with revised

Havells India : Maintain BUY with revised TP of Rs 670 

We consider India business as a consumption play which can grow at a sustainable 15-20%. The parent (India business) will not need to infuse more funds into Sylvania as the company can sustain its repayment obligations. Success of replicating India strategy in LatAM and other new emerging markets would drive consolidated earnings in the future. However, to factor in lower margin at Sylvania in the near term, we reduce our earnings estimates for FY13 and FY14 to Rs 31 and Rs 39 respectively (vs Rs 34 and Rs 42 earlier). Maintain BUY with revised TP of Rs 670.

Key highlights (Q2FY13)

India business: (1) Continued traction in consumer appliances and switchgears due to new product launches led to 33% and 29% YoY growth in segment revenues respectively and (2) Company is confident of achieving 15-20% revenue growth in the FY13 with EBIDTA margin between 11-13%.

Sylvania: (1) Sylvania reported revenue of Euro 110 mn (vs. Euro 116 mn last year), EBITDA margin for the quarter disappointed at 3.5% (vs. 7.5% last year). Adjusting for the exceptional gain of Euro 24 mn, Sylvania reported loss of Euro 1 mn vs. (PAT of Euro 2 mn last year). Management indicated H2 was likely to be better for Sylvania.

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