BSE: 517354 | NSE: HAVELLS | Electric Equipment | Large Cap
Past 10 year's financial track record analysis by Moneyworks4me indicates that Havells India Ltd is a good quality company.
The key valuation ratios of Havells India Ltd's currently when compared to its past seem to suggest it is in the Fair zone.
The Price Trend analysis by MoneyWorks4Me indicates it is Weak which suggest that the price of Havells India Ltd is likely to Fall in the short term. However, please check the rating on Quality and Valuation before investing.
Data adjusted to bonus, split, extra-ordinary income, rights issue and change in financial year end.
| Mar'15 | Mar'16 | Mar'17 | Mar'18 | Mar'19 | Mar'20 | Mar'21 | Mar'22 | Mar'23 | Mar'24 | TTM | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| ROCE % ⓘ | 28.8% | 34.9% | 25% | 29.2% | 29.5% | 22.1% | 30.4% | 27.8% | 23.2% | 25.5% | - |
| Value Creation Index ⓘ | 1.1 | 1.6 | 1.2 | 1.6 | 1.6 | 1.0 | 1.7 | 1.5 | 1.1 | 1.3 | - |
Growth Parameters ⓘGrowth Parameters Colour Code Guide ⓘ | |||||||||||
| Sales ⓘ | 5,239 | 5,378 | 6,135 | 8,139 | 10,068 | 9,429 | 10,428 | 13,889 | 16,868 | 18,550 | 20,648 |
| Sales YoY Gr. | - | 2.7% | 14.1% | 32.7% | 23.7% | -6.3% | 10.6% | 33.2% | 21.5% | 10% | - |
| Adj EPS ⓘ | 7.4 | 9.2 | 9.1 | 10.7 | 12.4 | 11.6 | 15.9 | 18.7 | 16.9 | 19.8 | 22.6 |
| YoY Gr. | - | 24.1% | -0.2% | 17.2% | 15.6% | -6.5% | 37.4% | 17.7% | -9.7% | 17.4% | - |
| BVPS (₹) ⓘ | 38.1 | 47.3 | 52.4 | 59.8 | 67 | 68.8 | 82.5 | 95.6 | 105.5 | 118.6 | 128.8 |
| Adj Net Profit ⓘ | 460 | 572 | 571 | 670 | 775 | 724 | 995 | 1,172 | 1,058 | 1,243 | 1,416 |
| Cash Flow from Ops. ⓘ | 600 | 525 | 778 | 1,108 | 513 | 825 | 658 | 1,745 | 565 | 1,959 | - |
| Debt/CF from Ops. ⓘ | 0.1 | 0.1 | 0.3 | 0.1 | 0.2 | 0.1 | 0.8 | 0.2 | 0 | 0 | - |
CAGR Colour Code Guide ⓘ
| 9 Years | 5 Years | 3 Years | 1 Years | |||||
|---|---|---|---|---|---|---|---|---|
| Sales ⓘ | 15.1% | 13% | 21.2% | 10% | ||||
| Adj EPS ⓘ | 11.6% | 9.9% | 7.6% | 17.4% | ||||
| BVPSⓘ | 13.5% | 12.1% | 12.9% | 12.4% | ||||
| Share Price | 18.9% | 19.4% | 9.3% | 13.3% | ||||
Performance Ratio Colour Code Guide ⓘ
| Mar'15 | Mar'16 | Mar'17 | Mar'18 | Mar'19 | Mar'20 | Mar'21 | Mar'22 | Mar'23 | Mar'24 | TTM | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Return on Equity % ⓘ | 20.4 | 21.5 | 18.3 | 19.1 | 19.5 | 17 | 21 | 21 | 16.8 | 17.7 | 18.3 |
| Op. Profit Mgn % ⓘ | 13.9 | 14.6 | 13.9 | 13.3 | 12.2 | 11.3 | 15.2 | 12.8 | 9.6 | 10.2 | 9.8 |
| Net Profit Mgn % ⓘ | 8.8 | 10.6 | 9.3 | 8.2 | 7.7 | 7.7 | 9.5 | 8.4 | 6.3 | 6.7 | 6.9 |
| Debt to Equity ⓘ | 0 | 0 | 0.1 | 0 | 0 | 0 | 0.1 | 0.1 | 0 | 0 | - |
| Working Cap Days ⓘ | 64 | 68 | 66 | 77 | 87 | 99 | 109 | 107 | 108 | 108 | 72 |
| Cash Conv. Cycle ⓘ | 19 | 24 | 21 | 19 | 24 | 34 | 41 | 32 | 33 | 31 | 33 |
Sales growth is growing at healthy rate in last 3 years 21.17%
Sales growth is good in last 4 quarters at 14.93%
Return on Equity has declined versus last 3 years average to 18.30%
Net Profit has been subdued in last 3 years 7.64%
| Standalone | Consolidated | |
|---|---|---|
| TTM EPS (₹) | 22.6 | 22.4 |
| TTM Sales (₹ Cr.) | 20,648 | 20,677 |
| BVPS (₹.) ⓘ | 128.8 | 128.8 |
| Reserves (₹ Cr.) ⓘ | 8,013 | 8,009 |
| P/BV ⓘ | 11.58 | 11.59 |
| PE ⓘ | 66.09 | 66.76 |
| From the Market | |
|---|---|
| 52 Week Low / High (₹) | 1287.35 / 2104.95 |
| All Time Low / High (₹) | 0.16 / 2104.95 |
| Market Cap (₹ Cr.) | 93,543 |
| Equity (₹ Cr.) | 62.7 |
| Face Value (₹) | 1 |
| Industry PE ⓘ | 71.8 |
| Pledged * | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
Particulars | Q2FY24 (Rs. Cr) | YoY Trend | Comments |
| Revenue | 3,900 | +6% | Cables and wires segment and switchgear segment posted revenue growth of 9.4% and 8.1%respectively |
| EBITDA | 373 | +30% | |
| EBITDA Margin | 10% | +200 bps | correction in commodity prices and change in revenue mix resulted in margin expansion |
| PAT | 249 | 33% |
Good Result. The growth is primarily driven by robust demand momentum in sectors such as infrastructure and real estate.
|
Particulars |
Q1FY24 |
YOY Trend |
Comments |
|
Revenue |
4,824 |
14% |
The cables and wires segment and Lloyd segment posted revenue growth of 25% and 20% respectively. |
|
EBITDA |
402 |
11% |
|
|
EBITDA Margin |
8.3% |
-20bps |
Overall margins maintained ; Lighting margins adversely impacted on account of low value growth and price erosion |
|
PAT |
287 |
18% |
|
Robust revenue numbers despite sluggish consumer demand.
We find it strange how bull markets compel businessman and investor alike to swing the bat. All of us know that the businesses are priced to perfection in bull market despite that the companies acquire business at high valuation and investors push more money into overpriced equities. We at MoneyWorks4me often behave contrary to the herd. We sell when others BUY and Buy when others are Selling. Value investing is all about paying a right price and be rational across market cycles.
You might have observed we have been slightly conservative valuation for Havells all the time. The market seem to discounting very high growth rates and steep price multiple as if it has strong pricing power and sticky revenues.
If we reverse calculate valuation of Havells by assigning best possible PE multiple of 23-25x, the current market price is implying quite steep 19-22% CAGR over 5 years.
Lloyd Deal: This acquisition is purely a revenue strategy rather than value. We believe that the company is trying to diversify away from just cables and switchgear business. Cables business has been quite competitive always and switchgear business has been a slow grower. Acquiring Lloyd business gives them additional market share in consumer durables space and economies of scale to advertise and distributor set up. So the management has opted for revenue growth over ROE growth. It may not be a bad strategy per se but room for error is very low. Lloyd scaled up business very fast and acquired good market share in various segment, especially Air Conditioning. This may have tempted Havells’ management to acquire the company and use economies of scale in its favour in competitive area. By economies of scale, we mean that the advertisement cost and distribution cost do not go up with increase in sales. When the industry has 2-3 big players, you need to have more or less similar market share to fight the competition. You need to match advertisement expenses and distributor margins. Being a marginal player will throw you out of the competition. We will be closely tracking the execution and how the growth pans out. The company had acquired European company in 2007 and execution was poor. We have seen capital misallocation in the past. We need to take optimistic expectations from this acquisition with pinch of salt. Its better to be safe than sorry.
The company’s margins are already at peak due to lower copper price and we do not believe that the company can retain cost benefits longer. This means that the company should deliver 21% CAGR growth from revenues only. We believe that the expectations are quite optimistic and leave us with no upside. We consider selling the stock citing overvaluation.
We do like the company and may consider buying the stock if it comes in our buying range. Our valuations keep rising every half year so do not feel that the company will not come to our buy range in near future. Stock Price might collapse and valuation might rise, this way it may trade in our buy range in future.
A portfolio must be held for the long term, which we define as at least 5-7 years. However, this does not mean every stock will perform in each year. Our performance should be judged on the basis of the overall portfolio over 2-3 years at least, not on the basis of short-term performance of individual stocks. Uninvested cash should be parked in money market/liquid funds/fixed deposits earning 7-8% pre-tax returns.
Currently, the broader markets seem over valued on basic metrics. Be extremely cautious. Don't rush to buy average or below average companies. Stay away from the euphoria and overvalued stocks. Keep some cash handy to buy stocks if markets correct. Don't be fully invested at these levels.
Havells India has decided to divest its 100% holding in Havells Malta and Havells Exim (Sylvania business) to China-based Shanghai Feilo Acoustics Company (FEILO). At present, Havells India plans to divest its 80% holding for a consideration of €148.8 mn (~ 1070 Cr) by February 2016 while the remaining 20% will be divested in a span of three to five years. While Sylvania contributed 35% of the consolidated turnover of Havells in FY15, it reported losses of €4.0mn, due to weak market conditions in Europe as well as continued pension liability losses. Havells had invested €140mn in equity as of date in the European brand and is expected to be offered an equity value of more than €148 mn, which will be marginally higher than its actual investment. This was poor capital allocation on the management’s part which has been corrected now. With this move, the company is likely to shift its entire focus to the domestic market. Since the Havells India standalone entity is debt-free, the cash realisation from the deal would be reinvested in India business for organic and inorganic growth.
At current price of Rs. 301/share including cash from the deal, the stock trades at 29x FY17 EPS. All the positives from the deal are factored in the price. We understand that the company has strong brand and industry leading distribution network. Even after considering the company’s position and high growth from economic turnaround, the price multiple looks elevated. Probably the market is expecting the lower commodity prices to increase gross margins of the company. However, we feel that the company competes in highly competitive & fragmented market with numerous players and top 3 players controlling just <15% market share. This is the reason the company is likely to pass on the benefits from lower commodity prices to increase market share. In that case, the stock looks highly overvalued and provides limited upside over period of 2 years.
We had generated SELL on Havells India Rs. 294/share on 26th November’15. Even after considering cash realization from sale of Sylvania business, we do not see any upside in the stock. One may expect a small dividend payment from the company but not more 1-2% on current price.
The stock may go from overvalued to more overvalued levels due to bullish sentiment. But fundamentally, there is no upside left in the stock. We re-iterate our SELL on the stock at Rs. 301/share.
| PARTICULARS | Mar'15 | Mar'16 | Mar'17 | Mar'18 | Mar'19 | Mar'20 | Mar'21 | Mar'22 | Mar'23 | Mar'24 |
|---|---|---|---|---|---|---|---|---|---|---|
| Sales | 5,239 | 5,378 | 6,135 | 8,139 | 10,068 | 9,429 | 10,428 | 13,889 | 16,868 | 18,550 |
| Operating Expenses ⓘ | 4,514 | 4,594 | 5,283 | 7,060 | 8,845 | 8,370 | 8,845 | 12,118 | 15,247 | 16,666 |
| Manufacturing Costs | 439 | 485 | 494 | 501 | 600 | 598 | 669 | 813 | 946 | 1,039 |
| Material Costs | 3,050 | 3,031 | 3,489 | 4,786 | 6,090 | 5,642 | 6,243 | 9,077 | 11,297 | 12,146 |
| Employee Cost | 313 | 371 | 500 | 650 | 837 | 900 | 885 | 1,015 | 1,275 | 1,541 |
| Other Costs ⓘ | 712 | 708 | 799 | 1,124 | 1,318 | 1,231 | 1,047 | 1,214 | 1,729 | 1,941 |
| Operating Profit ⓘ | 725 | 784 | 853 | 1,078 | 1,223 | 1,059 | 1,583 | 1,771 | 1,621 | 1,884 |
| Operating Profit Margin (%) | 13.8% | 14.6% | 13.9% | 13.2% | 12.1% | 11.2% | 15.2% | 12.8% | 9.6% | 10.2% |
| Other Income ⓘ | 52 | 69 | 134 | 117 | 128 | 112 | 188 | 160 | 180 | 249 |
| Interest ⓘ | 43 | 42 | 41 | 53 | 55 | 51 | 90 | 67 | 55 | 84 |
| Depreciation ⓘ | 88 | 105 | 120 | 140 | 149 | 218 | 249 | 261 | 296 | 338 |
| Exceptional Items ⓘ | 0 | 202 | -58 | 12 | 0 | 0 | 0 | 0 | 0 | 0 |
| Profit Before Tax ⓘ | 646 | 909 | 769 | 1,015 | 1,146 | 902 | 1,432 | 1,604 | 1,450 | 1,710 |
| Tax ⓘ | 181 | 197 | 230 | 302 | 359 | 169 | 392 | 409 | 375 | 437 |
| Profit After Tax | 465 | 712 | 539 | 713 | 787 | 733 | 1,040 | 1,195 | 1,075 | 1,273 |
| PAT Margin (%) | 8.9% | 13.2% | 8.8% | 8.8% | 7.8% | 7.8% | 10.0% | 8.6% | 6.4% | 6.9% |
| Adjusted EPS (₹) | 7.5 | 11.4 | 8.6 | 11.4 | 12.6 | 11.7 | 16.6 | 19.1 | 17.2 | 20.3 |
| Dividend Payout Ratio (%) | 40% | 53% | 41% | 35% | 36% | 34% | 39% | 39% | 44% | 44% |
| PARTICULARS | Mar'15 | Mar'16 | Mar'17 | Mar'18 | Mar'19 | Mar'20 | Mar'21 | Mar'22 | Mar'23 | Mar'24 |
|---|---|---|---|---|---|---|---|---|---|---|
Equity and Liabilities | ||||||||||
| Shareholders Fund | 2,376 | 2,954 | 3,274 | 3,739 | 4,192 | 4,304 | 5,164 | 5,988 | 6,612 | 7,432 |
| Share Capital ⓘ | 62 | 62 | 62 | 63 | 63 | 63 | 63 | 63 | 63 | 63 |
| Reserves ⓘ | 2,313 | 2,891 | 3,211 | 3,677 | 4,129 | 4,242 | 5,101 | 5,925 | 6,550 | 7,369 |
| Minority Interest | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Debt | 42 | 0 | 198 | 81 | 41 | 0 | 394 | 273 | 0 | 0 |
| Long Term Debt | 42 | 0 | 0 | 81 | 41 | 0 | 394 | 273 | 0 | 0 |
| Short Term Debt | 0 | 0 | 198 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Trade Payables | 395 | 436 | 630 | 1,634 | 1,560 | 1,414 | 1,597 | 2,379 | 2,643 | 2,691 |
| Others Liabilities ⓘ | 837 | 699 | 859 | 1,087 | 1,333 | 1,330 | 1,943 | 2,212 | 2,223 | 2,651 |
| Total Liabilities ⓘ | 3,649 | 4,089 | 4,960 | 6,541 | 7,126 | 7,048 | 9,097 | 10,852 | 11,478 | 12,774 |
Fixed Assets | ||||||||||
| Gross Block | 1,327 | 1,308 | 1,440 | 3,087 | 3,403 | 4,048 | 4,196 | 4,564 | 5,002 | 5,683 |
| Accumulated Depreciation | 342 | 120 | 231 | 356 | 499 | 698 | 906 | 1,130 | 1,382 | 1,695 |
| Net Fixed Assetsⓘ | 985 | 1,188 | 1,210 | 2,731 | 2,904 | 3,349 | 3,290 | 3,434 | 3,621 | 3,988 |
| CWIP ⓘ | 22 | 20 | 12 | 24 | 233 | 86 | 90 | 57 | 166 | 299 |
| Investmentsⓘ | 1,012 | 463 | 389 | 42 | 2 | 2 | 308 | 428 | 201 | 41 |
| Inventories | 690 | 784 | 928 | 1,622 | 1,919 | 1,872 | 2,620 | 2,968 | 3,708 | 3,409 |
| Trade Receivables | 133 | 158 | 229 | 325 | 407 | 241 | 560 | 765 | 971 | 1,157 |
| Cash Equivalents | 522 | 1,365 | 1,938 | 1,526 | 1,288 | 1,107 | 1,625 | 2,536 | 1,862 | 3,015 |
| Others Assetsⓘ | 285 | 111 | 255 | 271 | 374 | 391 | 604 | 665 | 948 | 865 |
| Total Assets ⓘ | 3,649 | 4,089 | 4,960 | 6,541 | 7,126 | 7,048 | 9,097 | 10,852 | 11,478 | 12,774 |
| PARTICULARS | Mar'15 | Mar'16 | Mar'17 | Mar'18 | Mar'19 | Mar'20 | Mar'21 | Mar'22 | Mar'23 | Mar'24 |
|---|---|---|---|---|---|---|---|---|---|---|
| Cash Flow From Operating Activity ⓘ | 600 | 525 | 778 | 1,108 | 513 | 825 | 658 | 1,745 | 565 | 1,959 |
| PBT ⓘ | 646 | 909 | 769 | 1,003 | 1,146 | 902 | 1,432 | 1,604 | 1,450 | 1,710 |
| Adjustment ⓘ | 65 | -143 | 82 | 94 | 77 | 184 | 196 | 213 | 217 | 210 |
| Changes in Working Capital ⓘ | 40 | -96 | 132 | 256 | -464 | -21 | -698 | 342 | -711 | 431 |
| Tax Paid ⓘ | -150 | -145 | -205 | -245 | -247 | -240 | -271 | -414 | -392 | -392 |
| Cash Flow From Investing Activity ⓘ | -609 | -78 | -227 | -1,002 | 188 | -548 | -763 | -759 | 39 | -1,635 |
| Capex | -167 | -174 | -236 | -1,589 | -500 | -359 | -154 | -253 | -586 | -762 |
| Net Investments | -347 | -846 | -80 | 305 | 617 | -251 | -730 | -605 | 504 | -1,037 |
| Others ⓘ | -94 | 942 | 89 | 282 | 71 | 62 | 120 | 99 | 120 | 165 |
| Cash Flow From Financing Activityⓘ | -269 | -498 | -72 | -358 | -318 | -716 | 190 | -547 | -907 | -534 |
| Net Proceeds from Shares ⓘ | 10 | 3 | 9 | 15 | 18 | 24 | 10 | 31 | 27 | 21 |
| Net Proceeds from Borrowing ⓘ | -103 | 0 | 0 | 108 | -14 | -54 | 451 | -97 | -394 | 0 |
| Interest Paid ⓘ | -17 | -6 | -9 | -20 | -13 | -5 | -46 | -24 | -7 | -8 |
| Dividend Paid ⓘ | -146 | -375 | -187 | -219 | -250 | -532 | -188 | -407 | -470 | -470 |
| Others ⓘ | -12 | -120 | 115 | -243 | -59 | -149 | -37 | -49 | -63 | -77 |
| Net Cash Flow ⓘ | -277 | -51 | 478 | -252 | 383 | -439 | 85 | 438 | -303 | -209 |
| PARTICULARS | Mar'15 | Mar'16 | Mar'17 | Mar'18 | Mar'19 | Mar'20 | Mar'21 | Mar'22 | Mar'23 | Mar'24 |
|---|---|---|---|---|---|---|---|---|---|---|
| Ratios | ||||||||||
| ROE (%) | 20.64 | 26.72 | 17.31 | 20.32 | 19.85 | 17.26 | 21.96 | 21.43 | 17.06 | 18.13 |
| ROCE (%) | 28.82 | 34.86 | 25.03 | 29.17 | 29.54 | 22.08 | 30.43 | 27.75 | 23.16 | 25.53 |
| Asset Turnover Ratio | 1.67 | 1.49 | 1.46 | 1.45 | 1.48 | 1.34 | 1.3 | 1.4 | 1.52 | 1.54 |
| PAT to CFO Conversion(x) | 1.29 | 0.74 | 1.44 | 1.55 | 0.65 | 1.13 | 0.63 | 1.46 | 0.53 | 1.54 | Working Capital Days |
| Receivable Days | 8 | 9 | 11 | 12 | 13 | 12 | 14 | 17 | 19 | 21 |
| Inventory Days | 43 | 47 | 47 | 56 | 64 | 73 | 78 | 73 | 72 | 70 |
| Payable Days | 47 | 48 | 56 | 75 | 79 | 74 | 77 | 80 | 81 | 80 |
Havells India Ltd. is a leading Fast Moving Electrical Goods (FMEG) Company and a major power distribution equipment manufacturer with a strong global presence. It enjoys enviable market dominance across a wide spectrum of products, including Industrial & Domestic Circuit Protection Devices, Cables & Wires, Motors, Fans, Modular Switches, Home Appliances, Air Conditioners, Electric Water Heaters, Power Capacitors, Luminaires for Domestic, Commercial and Industrial Applications. The company pioneered the concept of exclusive brand showroom in the electrical industry with ‘Havells Galaxy’. Presently, Havells owns some of the most prestigious brands like Havells, Lloyd, Crabtree and Standard.
Business area of the company
The Company is engaged in manufacturing Switchgears, Cable, Lighting and Fixtures, and Electric Consumer Durables. The Company operates through various segments: Switchgears, Lighting and fixtures, Cables and Electrical Consumer Durables. The Switchgear segment comprises domestic and the industrial switchgears, electrical wiring accessories, industrial motors, pumps and capacitors. The Lighting and fixture segment comprises energy saving lamps (CFL) and luminaries. The Cables segment comprises domestic cables and industrial underground cables. The Electrical Consumer Durable segment comprises fans, water heaters and domestic appliances.
Products of the company
Appliances
Fans
Lloyd Consumer Durables
Water Heaters
Personal Grooming
Water Purifier
Air Coolers
Switches
Pumps
Lighting
Switchgears
Flexible Cables
Awards
Milestones
1983- 2003
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2005
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2007
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2009
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2020
MoneyWorks4Me rating and ranking of funds for SIP is available to subscribers only. Moneyworks4Me is not a rating and ranking agency, however it is required that users have a way of selecting funds and building a Portfolio. The method used by it are described below to enable users to understand the logic behind the rating and ranking Subscriber will find more details on this in the various content made available from time to time. In case you need more please write to besafe@moneyworks4Me.com
MoneyWorks4Me rates and ranks mutual funds based on the following data-driven system:
Funds ranking in screeners: Performance Consistency and Quality are two parameters used for ranking funds for SIP. The ranking as follows GG, GO, GR, OG, OO, OR, RG, RO and RR.
With the same color-coded funds, the one with the higher Average 3-year rolling returns (over 5 to 10 years), the number that appears in the Performance tag, ranks higher.
Here is the summary:
The third tag Upside Potential is not relevant for SIP. It is relevant for lumpsum investments in Mutual Funds.
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