29 July 2019
1QFY20 Results Update | Sector: Capital Goods
Havells India
Neutral
BSE SENSEX
37,686
S&P CNX
11,189
CMP: INR666
TP: INR700 (+5%)
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Lloyd facing stiff competition
Strategy in place but proving time consuming
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
HAVL IN
625
416.7 / 6.1
807 / 550
-11/-11/6
983
40.5
Financials & Valuations (INR b)
Y/E Mar
2019
2020E
100.6
114.1
Net Sales
11.9
13.5
EBITDA
7.9
8.9
PAT
12.7
14.2
EPS (INR)
12.9
12.2
Gr. (%)
67.8
76.9
BV/Sh (INR)
18.7
18.5
RoE (%)
18.4
18.2
RoCE (%)
52.9
47.2
P/E (x)
9.9
8.7
P/BV (x)
2021E
133.8
16.6
10.9
17.5
23.2
88.1
19.8
19.8
38.3
7.6
Estimate change
TP change
Rating change
Another quarter of revenue pressure:
Revenues continued disappointing for
the second consecutive quarter, with growth of meager 4.5% YoY to
INR27.1b (10% miss). EBITDA too declined 11.7% YoY to INR2.8b (24% miss),
with the margin contracting 180bp YoY to 10.2%. Other income came in
higher than our estimate at INR397m. However, the tax rate stood at 34%
v/s 30.8% in 1QFY19. Thus, net profit was down 17% YoY to INR1.7b (29%
miss) in the quarter.
Lloyd hit by intensifying competition:
In a seasonally strong quarter backed
by a robust summer season, Lloyd reported an 8% decline in revenues.
While Lloyd revenue was impacted by a sharp decline in LED TV sales, we
believe
that even in the AC business, the company has lost market share.
Lloyd reported an EBITDA margin of just 1.4% v/s 8.1% in 1QFY19 due to (a)
weak top line and (b) higher ad spends at 10.2% of sales v/s 7.1% in 1QFY19
(likely against the backdrop of the Cricket World Cup). Management
admitted to fierce competition in terms of pricing in the segment as
competitors were more focused on volume rather than profitability,
especially given weak sales last summer and the high inventory level into the
summer season this year. Thus, despite of input cost pressure on account of
INR depreciation and higher import duty, price hikes eluded the segment.
Lloyd’s performance was also impacted by the ongoing distribution network
revamp, as management is focusing on increasing penetration through
multi-brand retail rather than the traditional low-price model distribution
network.
We note that Lloyd is carrying higher-than-usual inventory at the
end of the season.
Real estate slowdown impacts core growth:
Ex-Lloyd business, HAVL
reported revenue growth of 9% YoY. Management attributed
flat growth in
the Switchgears business
to the slowdown in the real estate market. The
industry has been registering negative growth since Nov’18; however, HAVL
has gained market share in the segment. Going forward, the recovery may
be stretched out in the segment.
Cables & Wires
segment reported revenue
growth of 4%, but is expected to recover in the second half on account of
likely higher infrastructure spending.
Lighting business
continues witnessing
price erosion. However, the key silver lining was the ability of the company
to improve margins (+140bp) on account of a better product mix.
ECD
segment
delivered strong growth of 24% YoY, led by high-teen growth in
fans segment, market share gain in water heaters and strong growth in
other appliances, given the low base. The company continues gaining
market share in the ECD segment and expects the trend to continue. On the
margin front, HAVL (ex-Lloyd) EBITDA margin stood at 12.9% (-60bp YoY) –
the weakest in the past two years.
Nilesh Bhaiya – Research Analyst
(Nilesh.Bhaiya@MotilalOswal.com); +91 22 6129 1556
Amit Shah – Research Analyst
(Amit.Shah@MotilalOswal.com); +91 22 6129 1543
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
 Motilal Oswal Financial Services
Havells India
Margins to expand going forward:
EBITDA margins were impacted by high
employee costs and higher ad-spends. Together these two factors led to an
180bp contraction in the blended EBITDA margin. Ad-spends were higher on
account of the IPL/the Cricket World Cup and may taper down going forward,
supporting the margins recovery. Also, it has been investing to build capabilities
with new hires and believes that such investments have peaked. Thus, margins
should recover in the core business from the current level of 12.9% (as reported
in 1QFY20). In the Lloyd business, the new factory will cater to ~70% of the AC
business in the next season. Ad-spends in the Lloyd business stood at 10.2% of
sales in 1Q v/s ~7% in FY19. It expects ad-spends to moderate to ~5.5% in FY21,
aiding margin expansion in Lloyd.
Cutting EPS estimates for FY20/21:
We cut our FY20/21 EPS estimates by
11%/13% to factor in lower revenue growth and margin assumption, especially
in Lloyd. Our FY19-21 EPS CAGR estimate now stands at 17.6% on the back of
revenue CAGR of 15.4%.
Lowering TP; maintaining Neutral stance:
On back of our EPS cut, our TP is
reduced to INR700 (prior: INR800) with an unchanged target FY21E P/E multiple
of 40x (in line with the last-five-year average trading multiple but at ~10%
discount to the current one-year forward multiple of 44x). Maintain
Neutral
as
we await a better entry point in the stock.
FY20E
2QE
3QE
25,143 29,326
14.8
16.4
2,967
3,607
13.0
22.4
11.8
12.3
480
480
40
38
400
400
2,847
3,489
883
1,082
31.0
31.0
1,964
2,407
10.0
23.0
1,964
2,407
10.0
23.0
FY19
4QE
32,530
18.2
4,200
30.1
12.9
496
25
409
4,088
1,317
32.2
2,770
33.9
2,770
33.9
1,00,576
23.6
11,922
13.6
11.9
1,486
159
1,276
11,553
3,637
31.5
7,915
11.1
7,915
13.0
FY20E
1,14,119
13.5
13,530
13.5
11.9
1,925
150
1,606
13,061
4,179
32.0
8,881
12.2
8,881
12.2
(INR M)
MOSL
Var.
1QE
(%)
30,257 -10.4
16.5
3,631 -24.1
16.3
12.0
350
30
310
3,561 -25.9
1,104
31.0
2,457 -29.2
16.8
2,457 -29.2
16.8
Quarterly Perf. (Standalone)
Y/E March
Sales
Change (%)
Adj EBITDA
Change (%)
Adj EBITDA margin %
Depreciation
Interest
Other Income
PBT
Tax
Effective Tax Rate (%)
Reported PAT
Change (%)
Adj PAT
Change (%)
1Q
25,963
39.5
3,123
81.1
12.0
350
26
292
3,039
935
30.8
2,104
73.3
2,104
73.3
FY19
2Q
3Q
21,910 25,184
23.3
28.1
2,625
2,946
2.2
12.3
12.0
11.7
391
353
37
36
343
331
2,540
2,888
754
931
29.7
32.2
1,786
1,957
4.4
0.7
1,786
1,957
4.4
12.9
4Q
27,519
8.6
3,229
-9.7
11.7
391
61
310
3,086
1,018
33.0
2,068
-8.4
2,068
-11.9
1Q
27,120
4.5
2,757
-11.7
10.2
469
47
397
2,637
898
34.1
1,739
-17.3
1,739
-17.3
29 July 2019
2
 Motilal Oswal Financial Services
Havells India
Exhibit 1: Segmental performance snapshot
Y/E March
1Q
Sales
Switchgear
Cables & Wires
Consumer Durable
Lighting & Fixtures
Lloyd Electric
% YoY
Switchgear
Cables & Wires
Consumer Durable
Lighting & Fixtures
Lloyd Electric
Profit Contribution
Switchgear
Cables & Wires
Consumer Durable
Lighting & Fixtures
Lloyd Electric
Contribution Margin (%)
Switchgear
Cables & Wires
Consumer Durable
Lighting & Fixtures
Lloyd Electric
3,758
7,499
5,042
2,583
7,081
6
4
37
(5)
-
1,493
1,279
1,423
711
1,370
39.7
17.0
28.2
27.5
19.4
FY19
2Q
4,231
7,665
4,579
2,856
2,579
28
35
42
(0)
(4)
1,628
1,070
1,250
847
476
38.5
14.0
27.3
29.6
18.5
3Q
4,162
8,203
5,552
3,695
3,572
21
31
34
29
22
1,631
1,294
1,412
1,089
531
39.2
15.8
25.4
29.5
14.9
4Q
4,085
8,979
5,331
3,800
5,324
4
17
15
18
(9)
1,605
1,575
1,372
1,047
798
39.3
17.5
25.7
27.6
15.0
1Q
3,775
7,785
6,235
2,804
6,520
0
4
24
9
(8)
1,489
1,288
1,729
809
1,049
39.5
16.5
27.7
28.9
16.1
FY20
2QE
4,570
8,584
5,953
3,199
2,836
8
12
30
12
10
1,737
1,374
1,607
928
454
38.0
16.0
27.0
29.0
16.0
Var.
3QE
4,578
9,352
7,218
4,249
3,929
10
14
30
15
10
1,740
1,496
1,913
1,232
629
38.0
16.0
26.5
29.0
16.0
4QE
4,116
10,506
7,218
4,492
6,198
14
17
25
18
16
1,560
1,639
1,939
1,307
986
37.9
15.6
26.9
29.1
15.9
1QE
4,526
8,474
5,853
3,048
8,356
12
13
23
18
18
1,720
1,314
1,639
869
1,588
38.0
15.5
28.0
28.5
19.0
-13.4%
-1.9%
5.5%
-6.8%
-33.9%
-16.6%
-8.1%
6.5%
-8.0%
-22.0%
Source: MOFSL, Company
29 July 2019
3
 Motilal Oswal Financial Services
Havells India
Exhibit 2: P&L breakdown between Havells (ex-Lloyd) and the Lloyd business
P&L breakdown (INR m)
Revenue
Havells
YoY
Lloyd
YoY
Total
YoY
EBITDA
Havells
EBITDA margin
Lloyd
EBITDA margin
Total
EBITDA margin
Depreciation
Havells
Lloyd
Total
Interest expense
Havells
Lloyd
Total
Other income
Havells
Lloyd
Total
PBT
Havells
YoY
Lloyd
YoY
Total
YoY
Taxes
Havells
Tax rate
Lloyd
Tax rate
Total
PAT
Havells
YoY
Lloyd
YoY
Total
YoY
2QFY18
15,076
3.8%
2,698
17,774
22.4%
2,380
15.8%
189
7.0%
2,569
14.5%
310
39
349
67
-
67
259
28
287
2,262
11.4%
178
2,440
20.2%
676
29.9%
53
29.8%
729
1,586
8.8%
125
1,711
17.4%
3QFY18
16,728
11.1%
2,930
19,658
30.5%
2,537
15.2%
85
2.9%
2,622
13.3%
313
50
363
55
-
55
163
115
278
2,332
24.2%
150
2,482
32.2%
704
30.2%
44
29.5%
748
1,628
21.5%
106
1,734
29.4%
4QFY18
19,508
14.1%
5,841
25,349
48.2%
2,853
14.6%
724
12.4%
3,577
14.1%
291
56
347
84
-
84
245
12
257
2,723
16.5%
680
3,403
45.6%
855
31.4%
201
29.5%
1,055
1,868
9.0%
480
2,348
36.9%
1QFY19
18,882
18.5%
7,081
165.0%
25,963
39.5%
2,549
13.5%
574
8.1%
3,123
12.0%
300
51
351
25
25
292
292
2,516
57.1%
523
417.8%
3,039
78.5%
774
30.8%
161
30.8%
935
1,742
52.6%
362
402.9%
2,104
73.3%
2QFY19
19,331
28.2%
2,578
-4.4%
21,909
23.3%
2,545
13.2%
80
3.1%
2,625
12.0%
341
50
391
37
37
343
343
2,510
11.0%
30
-83.1%
2,540
4.1%
745
29.7%
9
29.7%
754
1,765
11.3%
21
-83.1%
1,786
4.4%
3QFY19
21,612
29.2%
3,572
21.9%
25,184
28.1%
2,885
13.3%
61
1.7%
2,946
11.7%
308
45
353
36
36
299
32
331
2,840
21.8%
48
-68.0%
2,888
16.4%
915
32.2%
15
32.2%
931
1,925
18.2%
33
-69.2%
1,957
12.9%
4QFY19
22,195
13.8%
5,324
-8.9%
27,519
8.6%
3,047
13.7%
182
3.4%
3,229
11.7%
333
58
391
58
3
61
217
92
309
2,873
5.5%
213
-68.7%
3,086
-9.3%
947
33.0%
70
33.0%
1,018
1,926
3.1%
143
-70.2%
2,068
-11.9%
1QFY20
20,600
9.1%
6,520
-7.9%
27,120
4.5%
2,667
12.9%
89
1.4%
2,756
10.2%
404
65
469
47
47
310
87
397
2,526
0.4%
111
-78.8%
2,637
-13.2%
860
34.1%
38
34.1%
898
1,666
-4.4%
73
-79.8%
1,739
-17.4%
Source: MOFSL, Company
29 July 2019
4
 Motilal Oswal Financial Services
Havells India
Exhibit 3: Havells’ (ex-Lloyd) growth trend has slowed over
last two quarters
Havells (ex-Lloyd) 29%
28%
22%
18%
14%
9%
7%
14%
9%
60%
40%
20%
0%
-20%
Exhibit 4: …led by weak growth across key segments
Cable and wires
Switchgears
Lighting and fixtures
Electrical consumable durables
Exhibit 5: Havells (ex-Lloyd) revenue trend
(INR b)
Havells (ex-Lloyd) revenue
22.0
11.0
3.8
47
52
54
61
67
82
95
111
12.8
15.4
9.6
17.7
Growth
Exhibit 6: Havells (ex-Lloyd) EBITDA margin trend
13.8
Havells (ex-Lloyd) EBITDA margin
13.9
13.9
13.5
13.4
13.3 13.3
11.7
13.4
12.6
Exhibit 7: Lloyd revenue trend
(INR b)
Lloyd revenue
31.2
Growth
Exhibit 8: Lloyd EBITDA margin trend
Lloyd EBITDA margin
8.0
19
5.0
15.0
5.3
5.0
7.5
14
19
22
Exhibit 9: Overall revenue trend
(INR b)
Overall revenue
32.7
11.7
11.0
12.8
Growth
23.6
13.5
Exhibit 10: Blended margin trend
Blended EBITDA margin
13.8
17.3
12.6
13.5
13.9
13.4
12.9
11.9
11.9
3.8
54
12.4
47
52
61
81
101
114
134
Source: MOFSL, Company
Source: MOFSL, Company
29 July 2019
5
 Motilal Oswal Financial Services
Havells India
Havells - 1Q20 con-call takeaways
Update on Lloyd business
It has extended benefits similar to Havells dealers to Lloyd dealers for long term
association.
The company believes that the strategy is in right place. It has decided on
manufacturing facility much ahead of the changes witnessed in the segment.
Over the last one year, the pricing pressure has increased and competition has
decided to focus on volume rather than pricing.
While the Lloyd business has not seen revenue growth over the past two years,
this is a transition period and will become far more stable business.
Working capital strategy will mirror similar to Havells strategy as the new plant
becomes operational.
Don’t think that Lloyd will be price premium brand. Will be mass premium which
implies that business needs to be competitive. Some of the premium brands
have also taken price cuts and are actually playing mass premium segment.
Inventory continues to be as last year and is higher compared to usual level
post AC season, although not too high.
LED TV – structural changes to the category – Chinese brands are coming up at
lower pricing. Lloyd will continue to be in LED TV, but may be a passive
category as the focus is more on ACs, refrigerators and washing machines.
It has been working on distribution channel revamp. This is a time-consuming
exercise.
AC witnessed marginal decline. Larger decline in LED.
Ad-spends were 10% of sales. This should normalize going forward and should
be seen as an upfront investment.
Hoping to limit ad-spends to 5-5.5% of sales
by next year.
It will take 1-1.5 years for production to ramp up from domestic
manufacturing unit.
Cables & Wires
Steady growth in wires despite housing slowdown.
Cables – had certain production bottlenecks, which have been resolved with
capex coming down.
Switchgears
Industry has been registered negative growth since Nov.
Impacted due to slowdown in real estate and cash crunch.
Havells has gained market share.
Hope for a better environment, but recovery may be stretched out.
ECD
Fans delivering mid-teens growth. However, growth has slowed down a bit.
Expects superior growth to continue.
Other appliances – market share is low so growing at fast pace. Continues to
gain market share.
29 July 2019
6
 Motilal Oswal Financial Services
Havells India
Lighting
High volume growth continues.
Significant pressure on LED prices continues.
Margins
High ad-spends impacted margins as well. Should moderate and support
margins.
Have been investing for strengthening business. These costs have peaked and
expect margins to improve hereon.
Distribution network strategy
Havells is concentrating on improving rural distribution. Have setup separate
team for the same.
However, rural penetration led growth is not strong enough to compensate for
slowdown in the real estate sector.
Have got 25,000 retail outlets in rural, targeting 60,000 retail outlet in rural
market over the next 1-2 years.
Capex
Have invested INR1.4b in 1Q.
For the full year, it will be INR5.0b.
29 July 2019
7
 Motilal Oswal Financial Services
Havells India
Earnings change and Valuation
Cut FY20E/21E EPS estimates by 11%/13%:
We cut our FY20/21 EPS estimates
by 11%/13% to factor in lower revenue growth and margin assumption,
especially in Lloyd. Our FY19-21 EPS CAGR estimate now stands at 17.6% on the
back of revenue CAGR of 15.4%.
Old
FY20E
FY21E
1,18,038
1,38,534
14,831
18,552
12.6%
13.4%
9,932
12,509
New
FY20E
FY21E
1,14,119
1,33,825
13,530
16,626
11.9%
12.4%
8,881
10,939
Change
FY20E
FY21E
-3%
-3%
-9%
-10%
-0.7%
-1.0%
-11%
-13%
Source: MOSL, Company
Exhibit 11: We cut our FY20/21E EPS by 11%/13%
Earnings Change
INR m
Revenue
EBITDA
EBITDA margin
Adj. PAT
Cutting TP; maintaining Neutral stance:
On back of our EPS cut, our TP is
reduced to INR700 (prior: INR800) with an unchanged target FY21E P/E multiple
of 40x (in line with the last-five-year average trading multiple but at ~10%
discount to the current one-year forward multiple of 44x). Maintain
Neutral
as
we await a better entry point in the stock.
+1SD
54.4
-1SD
Exhibit 12: Havells trades at one-year forward P/E of 44x
P/E (x)
Avg (x)
Max (x)
Min (x)
60.0
50.0
40.0
30.0
20.0
10.0
0.0
40.7
27.1
13.5
9.6
43.8
Source: MOSL, Company
29 July 2019
8
 Motilal Oswal Financial Services
Havells India
Financials and valuations
Income Statement
Y/E March
Net Sales
Change (%)
Raw Materials
Staff Cost
Other Expenses
EBITDA
% of Net Sales
Depreciation
Amortization
Interest
Other Income
PBT
Tax
Rate (%)
Extra-ordinary Inc.(net)
Reported PAT
Change (%)
Adjusted PAT
Change (%)
2017
61,353
14.1
36,485
5,004
11,623
8,241
13.4
1,196
122
1,343
8,266
2,298
27.8
-578
5,390
-24.3
5,969
17.1
2018
81,386
32.7
49,808
6,497
14,588
10,493
12.9
1,395
240
1,170
10,028
3,022
30.1
119
7,125
32.2
7,006
17.4
2019
1,00,576
23.6
62,786
8,324
17,545
11,922
11.9
1,486
159
1,276
11,553
3,637
31.5
0
7,915
11.1
7,915
13.0
2020E
1,14,119
13.5
70,868
9,864
19,857
13,530
11.9
1,925
150
1,606
13,061
4,179
32.0
0
8,881
12.2
8,881
12.2
(INR Million)
2021E
1,33,825
17.3
82,837
11,344
23,018
16,626
12.4
2,085
150
1,696
16,087
5,148
32.0
0
10,939
23.2
10,939
23.2
Balance Sheet
Y/E March
Share Capital
Reserves
Net Worth
Loans
Deffered Tax Liability
Minority Interest
Capital Employed
Gross Fixed Assets
Less: Depreciation
Net Fixed Assets
Capital WIP
Curr. Assets
Inventory
Debtors
Cash & Bank Balance
Loans & Advances
Other Current Assets
Current Liab. & Prov.
Creditors
Other Liabilities
Provisions
Net Current Assets
Misc. Expenses
Application of Funds
2017
625
32,111
32,736
1,981
1,138
0
35,854
15,012
2,355
12,658
119
32,797
9,284
2,285
19,375
0
1,853
13,746
6,296
5,685
1,766
19,051
0
35,854
2018
625
36,766
37,392
1,080
2,070
0
40,541
34,113
6,799
27,314
241
36,905
16,217
3,254
15,262
0
2,173
24,873
16,340
6,754
1,780
12,032
0
40,541
2019
626
41,800
42,425
945
3,217
0
46,587
37,293
8,285
29,008
2,327
39,874
19,170
4,224
12,848
89
3,542
25,204
15,594
7,258
2,352
14,670
0
46,587
2020E
626
47,484
48,109
945
3,217
0
52,271
41,293
10,210
31,083
2,327
47,626
21,752
4,793
16,962
100
4,019
29,347
18,759
8,235
2,352
18,279
0
52,271
(INR Million)
2021E
626
54,485
55,110
945
3,217
0
59,272
43,793
12,295
31,498
2,327
58,873
25,508
5,620
22,914
118
4,713
34,008
21,999
9,657
2,352
24,865
0
59,272
29 July 2019
9
 Motilal Oswal Financial Services
Havells India
Financials and valuations
Ratios
Y/E March
Basic (INR)
Adjusted EPS
Growth (%)
Cash EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation (x)
P/Sales
P/E
Cash P/E
EV/EBITDA
EV/Sales
Price/Book Value
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
RoIC
Turnover Ratios
Debtors (Days)
Inventory (Days)
Creditors. (Days)
Asset Turnover (x)
Leverage Ratio
Debt/Equity (x)
2017
8.6
9.6
17.1
11.5
52.4
3.5
42.8
6.8
70.1
58.4
48.2
6.5
12.8
0.5
18.2
18.2
56.6
14
55
37
1.7
0.1
2018
11.4
11.2
17.3
13.4
59.8
4.0
41.7
5.1
59.8
49.9
38.4
5.0
11.2
0.6
18.7
18.8
37.4
15
73
73
2.0
0.0
2019
12.7
12.7
12.9
15.0
67.8
4.0
38.2
2.1
52.9
44.6
34.0
4.0
9.9
0.6
18.7
18.4
31.5
15
70
57
2.2
0.0
2020E
14.2
14.2
12.2
17.3
76.9
4.3
36.0
1.8
47.2
38.8
29.7
3.5
8.7
0.6
18.5
18.2
33.4
15
70
60
2.2
0.0
2021E
17.5
17.5
23.2
20.8
88.1
5.3
36.0
1.6
38.3
32.2
23.8
3.0
7.6
0.8
19.8
19.8
40.6
15
70
60
2.3
0.0
Cash Flow Statement
Y/E March
PBT before EO Items
Add : Depreciation
Interest
Less : Direct Taxes Paid
(Inc)/Dec in WC
CF from Operations
EO Income
CF from Oper. incl. EO Items
(Inc)/Dec in FA
Free Cash Flow
(Pur)/Sale of Investments
CF from Investments
(Inc)/Dec in Net Worth
(Inc)/Dec in Debt
Less : Interest Paid
Dividend Paid
CF from Fin. Activity
Inc/Dec of Cash
Add: Beginning Balance
Closing Balance
2017
8,266
1,196
122
2,298
865
8,151
-578
7,573
-2,049
5,524
701
-1,348
640
1,537
122
2,557
-502
5,723
13,652
19,375
2018
10,028
1,395
240
3,022
2,906
11,547
119
11,666
-1,338
10,328
3,071
-13,102
1,384
-901
240
2,922
-2,678
-4,113
19,375
15,262
2019
11,553
1,486
159
3,637
-5,051
4,509
0
4,509
-5,266
-757
372
-4,894
1,286
-135
159
3,020
-2,028
-2,413
15,262
12,848
2020E
13,061
1,925
150
4,179
504
11,461
0
11,461
-4,000
7,461
0
-4,000
0
0
150
3,197
-3,347
4,113
12,848
16,962
(INR Million)
2021E
16,087
2,085
150
5,148
-634
12,540
0
12,540
-2,500
10,040
0
-2,500
0
0
150
3,938
-4,088
5,952
16,962
22,914
29 July 2019
10
 Motilal Oswal Financial Services
Havells India
Explanation of Investment Rating
Investment Rating
BUY
SELL
NEUTRAL
UNDER REVIEW
NOT RATED
Expected return (over 12-month)
>=15%
< - 10%
< - 10 % to 15%
Rating may undergo a change
We have forward looking estimates for the stock but we refrain from assigning recommendation
*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within following 30
days take appropriate measures to make the recommendation consistent with the investment rating legend.
Disclosures
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the Regulations,
is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial products. MOFSL is a subsidiary
company of Passionate Investment Management Pvt. Ltd.. (PIMPL). MOFSL is a listed public company, the details in respect of which are available on www.motilaloswal.com. MOFSL
(erstwhile Motilal Oswal Securities Limited - MOSL) is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading Member with National Stock Exchange of
India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and National Commodity & Derivatives Exchange Limited (NCDEX) for its
stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member
of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance
products.
Details of associate entities of Motilal Oswal Financial Services Limited are available on the website at
http://onlinereports.motilaloswal.com/Dormant/documents/List%20of%20Associate%20companies.pdf
MOFSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and buy or sell
the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a
market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of
interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the specific recommendations made by the
analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even though there might exist an inherent conflict of interest in
some of the stocks mentioned in the research report
MOFSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report should be aware
that MOFSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific merchant banking, investment
banking or brokerage service transactions. Details of pending Enquiry Proceedings of Motilal Oswal Financial Services Limited are available on the website at
https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx
A graph of daily closing prices of securities is available at
www.nseindia.com, www.bseindia.com.
Research Analyst views on Subject Company may vary based on Fundamental research and
Technical Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated from MOFSL research activity
and therefore it can have an independent view with regards to Subject Company for which Research Team have expressed their views.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use
would be contrary to law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions.
For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong Securities
and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst Regulations) 2014 Motilal
Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of research report in Hong Kong. This report
is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity to which this document relates is only available to
professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction where their offer
or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not located in Hong Kong & are not conducting Research Analysis in Hong Kong.
For U.S.
Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state
laws in the United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934
Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by
MOFSL , including the products and services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to "Major Institutional Investors" as
defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This document must not be acted on or relied on
by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be engaged in
only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and
interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a
chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be
executed within the provisions of this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered
broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading
securities held by a research analyst account.
For Singapore
In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets services
license and an exempt financial adviser in Singapore.As per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and Paragraph 11 of First
Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL in respect of any matter arising
from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”, of which some of whom may consist of
"accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the SFA”). Accordingly, if a Singapore person is not or ceases to be
such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and inform MOCMSPL.
Specific Disclosures
1 MOSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.
2 MOSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company
3 MOSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months
4 MOSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report
5 Research Analyst has not served as director/officer/employee in the subject company
6 MOSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
7 MOSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months
8 MOSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months
9 MOSL has not received any compensation or other benefits from third party in connection with the research report
10 MOSL has not engaged in market making activity for the subject company
********************************************************************************************************************************
The associates of MOFSL may have:
-
financial interest in the subject company
-
actual/beneficial ownership of 1% or more securities in the subject company
-
received compensation/other benefits from the subject company in the past 12 months
29 July 2019
11
 Motilal Oswal Financial Services
Havells India
-
-
-
-
other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the specific
recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even though there
might exist an inherent conflict of interest in some of the stocks mentioned in the research report.
acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies)
discussed herein or act as an advisor or lender/borrower to such company(ies)
received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.
The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report
Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not consider
demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from clients which are not
considered in above disclosures.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research
analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
Terms & Conditions:
This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and may not be
altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of MOFSL. The report is
based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in nature. The information is obtained from
publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made
as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The report is prepared solely for informational purpose and does not
constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments for the clients. Though disseminated to all the customers
simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as customers by virtue of their receiving this report.
Disclaimer:
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or
in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for informational purpose and may not be
used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report constitutes investment, legal,
accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this
report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This
may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this document should make such investigations as it deems necessary to arrive at
an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult its own advisors to
determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors. Certain transactions -including those involving futures,
options, another derivative products as well as non-investment grade securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied,
is made as to the accuracy, completeness or fairness of the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is
provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The
Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and
the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform
or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a
separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of information that is
already available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or may not subscribe to all the
views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or
published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any
locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject MOFSL to any registration or
licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose
possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors, employees, agents or representatives shall be
liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.
The person accessing this information specifically agrees to exempt MOFSL or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not
to hold MOFSL or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOFSL or any of its affiliates or employees free and harmless from all losses,
costs, damages,
expenses that may be suffered by the person accessing this information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263; Website
www.motilaloswal.com.CIN no.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad(West), Mumbai-
400 064. Tel No: 022 7188 1000.
Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst: INH000000412. AMFI:
ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579;PMS:INP000006712. Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration
No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.:
INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond,
NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. which is a group company of MOFSL. Private Equity is offered
through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL. Research & Advisory services is backed by proper research. Please read the Risk
Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no assurance or guarantee of the returns. Investment in securities market is subject to market risk,
read all the related documents carefully before investing. Details of Compliance Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.
* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National Company Law
Tribunal, Mumbai Bench.
29 July 2019
12