Description
FINANCIAL ANALYSIS OF HAVELLS INDIA LIMITED
Global Presence Restructuring
It operates across Europe, Latin America & Africa
Quality Standard Growth Rate Market Leadership Profitability Global Presence Restructuring
ISO: 9001-2000, Relevant UL , CE, ISI certifications Estimated revenue growth at 15% CAGR for FY 11-13E Strong competitive positioning Strong CAGR of 26% in FY11-13E period It operates across Europe, Latin America & Africa Restructuring exercise aimed at cost savings. Their strategy has paid off with Havells set to realize cost benefits to the tune of € 25mn over FY10-CY11
0.9 (Showing marginally lower volatility than the market)
Beta
Future Potential
The Big Picture
Aggressive expansion plans as seen before in international markets The growth in the domestic electrical equipments industry on account of increasing electricity supply
ATTRACTIVE!! Rating - BUY Target –Rs. 539
? Established in 1971
?Promoted by Qimat Rai Gupta ? One of the largest & fastest growing ECD, electrical & power distribution equipment manufacturer ? Owns well known brands like Crabtree, Sylvania, Concord, Luminance, Linolite & SLI Lighting ? 11 state of the art manufacturing plants in India & operates 7 state of the art manufacturing plants across Europe, Latin America & Africa ? Global network spans 91 branches & offices, with over 8,000 employees in over 50 countries backed by a strong global network of 20,000 distributors
Share Holding Pattern (%) as on Mar’11
Promoters Private Corp FII/NRI Institutions Public 2% 2% 7%
27% 62%
Revenue Mix over FY11-13E
ECD Lighting Switchgear Cables & Wires
39%
17%
27%
17%
Share Holding Pattern (%) as on Mar’11
Promoters Private Corp FII/NRI Institutions Public 2% 2% 7%
27% 62%
Segments
Market Growth
Average no. of competitors
Competitive Positioning
Revenue
Operating Margin
Source : Indiabulls
? Varied Product Stream – diversified revenue stream & aggressive brandbuilding initiatives resulted in 25% revenue CAGR over the last 5 years on a standalone basis
? PAT to witness strong CAGR of 26% in FY11-13E period led by improvement in Sylvania profitability due to its aggressive restructuring activities in FY10 and FY11
? Revenue stability & profit growth – Sylvania is expected to contribute significantly to profitability from FY12E. Havells is expected to grow its revenue at a CAGR of 15% and PAT at 25% CAGR over FY11-FY13E ? Restructuring Plan –
? Sylvania operating cash flows to turn positive FY12E onwards
Sylvania to generate cash flows of Rs 866mn in FY12E and Rs 1,211mn in FY13E.
? Restructuring Plan –
? Strong positioning to leverage demand potential –
1. Growing disposable income with Indian households 2. Preference for premium products due to evolving lifestyle patterns 3. Strong sustainable demand for consumer electrical products 4. Demand towards energy saving products 5. 4,300 wholesalers and 25,000 retailers in India. In addition, it is also setting up unique Havells Galaxies
? Strong positioning to leverage demand potential –
1. Growing disposable income with Indian households 2. Preference for premium products due to evolving lifestyle patterns 3. Strong sustainable demand for consumer electrical products 4. Demand towards energy saving products 5. 4,300 wholesalers and 25,000 retailers in India. In addition, it is also setting up unique Havells Galaxies
? One of the lowest per capita consumption of electricity in the world
? Significant investments in building power infrastructure by the Govt. of India
? In FY10, copper accounted for 26% of total domestic business raw material costs and aluminum accounted for 17% of the domestic raw material costs
? In FY10, copper accounted for 26% of total domestic business raw material costs and aluminum accounted for 17% of the domestic raw material costs
? Every 1% change in copper prices impacts FY12E earnings by 1.3%, while every 1% change in aluminum prices impacts earnings by 0.7%
? Delay in restructuring of Sylvania
? Sylvania is expected to turn PAT positive in FY11 as against loss reported in FY10
? Delay in complete turnaround of Sylvania, continued weakness in European markets and slow growth in LATAM and Asia has adversely impacted revenues and profits
? Delay in restructuring of Sylvania ? Sylvania‘s debt obligations of around € 40million that are due for repayment in 2012-13 would need to be refinanced
? Rise in domestic competition
? Competition in the form of technology upgradation ? Price wars in certain segments like industrial switchgears, fans, cables & wires, CFL ? New segments like water heaters and appliances are highly competitive markets ? Heightened competition from unorganized sector or Chinese players
? Adverse movements/fluctuations in F/X
? Sylvania operates in Asia, Europe and LATAM markets, exposing it to multiple currency risk
? Havells has increased the outsourcing of components of Sylvania from emerging markets like India and China
1.6 1.4 1.2 1
1.41 1.15 0.85 0.63 1.26 1.27
1.33
0.8 0.6 0.4 0.2 0
FY09
0.75
0.74
0.78
FY10
FY11
FY12E
FY13E
Current Ratio
Quick Ratio
? High debtor collection ratio ? Speedy and effective mechanism in place showing extremely efficient operations ? Reduce dependence on short term loans 50 40 30 20 10 0 19.42 28.83 43.25
29.74
31.46
FY07
FY08
FY09
FY10
FY11
Debtor Turnover ratio
? Debt/Equity to decline from 2.3x in FY10 to 0.4x by FY13E ? No further investments in Sylvania are expected except for maintenance capex
? Capital Efficiency to improve with Sylvania turnaround
? ROCE to improve from 7.6% in FY10 to 26.8% in FY13E and ROE to improve from 17.4% in FY10 to 45.7% in FY13E
Price in 5 years = Estimated Dividends in 5 Years D1 = 2.50 D2 = D1 x (1.20) = 3 D3 = D2 x (1.20) = 3.6
Current mkt price is Rs. 425 per share, an expected dividend per share next year of Rs 2.50, an EPS of Rs 20, expected EPS growth of 20% per year, and a P/E ratio of 17. Target rate is 10%. Investment Horizon is five years. Payout is Constant. Price in 5 years = P/E x EPS x (1+g)^5 = 17x20x(1.20)^5 = 846 Estimated Dividends in 5 Years D1 = 2.50 D2 = D1 x (1.20) = 3 D3 = D2 x (1.20) = 3.6
D4 = D3 x (1.20) = 4.32
D5 = D4x (1.20) = 5.18
Po = 2.50 + 3.00 + 3.6 + 4.32 + 5.1+846 = 539 1.10 1.10^2 1.10^3 1.10^4 1.10^5 Hence, the current intrinsic value is Rs. 539 giving a MOS of (539-425=114). MOS% of 27%
Current mkt price is Rs. 425 per share, an expected dividend per share next year of Rs 2.50, an EPS of Rs 20, expected EPS growth of 20% per year, and a P/E ratio of 17. Target rate is 10%. Investment Horizon is five years. Payout is Constant. Price in 5 years = P/E x EPS x (1+g)^5 = 17x20x(1.20)^5 = 846 Estimated Dividends in 5 Years D1 = 2.50 D2 = D1 x (1.20) = 3 D3 = D2 x (1.20) = 3.6
D4 = D3 x (1.20) = 4.32
D5 = D4x (1.20) = 5.18
Po = 2.50 + 3.00 + 3.6 + 4.32 + 5.1+846 = 539 1.10 1.10^2 1.10^3 1.10^4 1.10^5 Hence, the current intrinsic value is Rs. 539 giving a MOS of (539-425=114). MOS% of 27%
Current mkt price is Rs. 425 per share, an expected dividend per share next year of Rs 2.50, an EPS of Rs 20, expected EPS growth of 20% per year, and a P/E ratio of 17. Target rate is 10%. Investment Horizon is five years. Payout is Constant. Price in 5 years = P/E x EPS x (1+g)^5 = 17x20x(1.20)^5 = 846 Estimated Dividends in 5 Years D1 = 2.50 D2 = D1 x (1.20) = 3 D3 = D2 x (1.20) = 3.6
D4 = D3 x (1.20) = 4.32
D5 = D4x (1.20) = 5.18
Po = 2.50 + 3.00 + 3.6 + 4.32 + 5.1+846 = 539 1.10 1.10^2 1.10^3 1.10^4 1.10^5 Hence, the current intrinsic value is Rs. 539 giving a MOS of (539-425=114). MOS% of 27%
Havells FY13 PEG Ratio
–> 9.8/20 = 0.49
Crompton FY13 PEG Ratio –> 17.5/15 = 1.16 Bajaj FY13 PEG Ratio Philips FY13 PEG Ratio –> 10.5/15 = 0.7 –> 10.7/15 = 0.7-
Havells FY13 PEG Ratio
–> 9.8/20 = 0.49
Crompton FY13 PEG Ratio –> 17.5/15 = 1.16 Bajaj FY13 PEG Ratio Philips FY13 PEG Ratio –> 10.5/15 = 0.7 –> 10.7/15 = 0.7-
Havells FY11E FY12E FY13E 0.7 1.59 2.06
Crompton
Bajaj 1.73 2.34 2.45
Phillips 0.75 0.72 0.84
1.36 1.42 1.5
By: Ankesh Panjwani Madhav Sud Nikhil Marwah Nitin Bhalla P. Srivastava Ridhika Seth
doc_884762117.pptx
FINANCIAL ANALYSIS OF HAVELLS INDIA LIMITED
Global Presence Restructuring
It operates across Europe, Latin America & Africa
Quality Standard Growth Rate Market Leadership Profitability Global Presence Restructuring
ISO: 9001-2000, Relevant UL , CE, ISI certifications Estimated revenue growth at 15% CAGR for FY 11-13E Strong competitive positioning Strong CAGR of 26% in FY11-13E period It operates across Europe, Latin America & Africa Restructuring exercise aimed at cost savings. Their strategy has paid off with Havells set to realize cost benefits to the tune of € 25mn over FY10-CY11
0.9 (Showing marginally lower volatility than the market)
Beta
Future Potential
The Big Picture
Aggressive expansion plans as seen before in international markets The growth in the domestic electrical equipments industry on account of increasing electricity supply
ATTRACTIVE!! Rating - BUY Target –Rs. 539
? Established in 1971
?Promoted by Qimat Rai Gupta ? One of the largest & fastest growing ECD, electrical & power distribution equipment manufacturer ? Owns well known brands like Crabtree, Sylvania, Concord, Luminance, Linolite & SLI Lighting ? 11 state of the art manufacturing plants in India & operates 7 state of the art manufacturing plants across Europe, Latin America & Africa ? Global network spans 91 branches & offices, with over 8,000 employees in over 50 countries backed by a strong global network of 20,000 distributors
Share Holding Pattern (%) as on Mar’11
Promoters Private Corp FII/NRI Institutions Public 2% 2% 7%
27% 62%
Revenue Mix over FY11-13E
ECD Lighting Switchgear Cables & Wires
39%
17%
27%
17%
Share Holding Pattern (%) as on Mar’11
Promoters Private Corp FII/NRI Institutions Public 2% 2% 7%
27% 62%
Segments
Market Growth
Average no. of competitors
Competitive Positioning
Revenue
Operating Margin
Source : Indiabulls
? Varied Product Stream – diversified revenue stream & aggressive brandbuilding initiatives resulted in 25% revenue CAGR over the last 5 years on a standalone basis
? PAT to witness strong CAGR of 26% in FY11-13E period led by improvement in Sylvania profitability due to its aggressive restructuring activities in FY10 and FY11
? Revenue stability & profit growth – Sylvania is expected to contribute significantly to profitability from FY12E. Havells is expected to grow its revenue at a CAGR of 15% and PAT at 25% CAGR over FY11-FY13E ? Restructuring Plan –
? Sylvania operating cash flows to turn positive FY12E onwards
Sylvania to generate cash flows of Rs 866mn in FY12E and Rs 1,211mn in FY13E.
? Restructuring Plan –
? Strong positioning to leverage demand potential –
1. Growing disposable income with Indian households 2. Preference for premium products due to evolving lifestyle patterns 3. Strong sustainable demand for consumer electrical products 4. Demand towards energy saving products 5. 4,300 wholesalers and 25,000 retailers in India. In addition, it is also setting up unique Havells Galaxies
? Strong positioning to leverage demand potential –
1. Growing disposable income with Indian households 2. Preference for premium products due to evolving lifestyle patterns 3. Strong sustainable demand for consumer electrical products 4. Demand towards energy saving products 5. 4,300 wholesalers and 25,000 retailers in India. In addition, it is also setting up unique Havells Galaxies
? One of the lowest per capita consumption of electricity in the world
? Significant investments in building power infrastructure by the Govt. of India
? In FY10, copper accounted for 26% of total domestic business raw material costs and aluminum accounted for 17% of the domestic raw material costs
? In FY10, copper accounted for 26% of total domestic business raw material costs and aluminum accounted for 17% of the domestic raw material costs
? Every 1% change in copper prices impacts FY12E earnings by 1.3%, while every 1% change in aluminum prices impacts earnings by 0.7%
? Delay in restructuring of Sylvania
? Sylvania is expected to turn PAT positive in FY11 as against loss reported in FY10
? Delay in complete turnaround of Sylvania, continued weakness in European markets and slow growth in LATAM and Asia has adversely impacted revenues and profits
? Delay in restructuring of Sylvania ? Sylvania‘s debt obligations of around € 40million that are due for repayment in 2012-13 would need to be refinanced
? Rise in domestic competition
? Competition in the form of technology upgradation ? Price wars in certain segments like industrial switchgears, fans, cables & wires, CFL ? New segments like water heaters and appliances are highly competitive markets ? Heightened competition from unorganized sector or Chinese players
? Adverse movements/fluctuations in F/X
? Sylvania operates in Asia, Europe and LATAM markets, exposing it to multiple currency risk
? Havells has increased the outsourcing of components of Sylvania from emerging markets like India and China
1.6 1.4 1.2 1
1.41 1.15 0.85 0.63 1.26 1.27
1.33
0.8 0.6 0.4 0.2 0
FY09
0.75
0.74
0.78
FY10
FY11
FY12E
FY13E
Current Ratio
Quick Ratio
? High debtor collection ratio ? Speedy and effective mechanism in place showing extremely efficient operations ? Reduce dependence on short term loans 50 40 30 20 10 0 19.42 28.83 43.25
29.74
31.46
FY07
FY08
FY09
FY10
FY11
Debtor Turnover ratio
? Debt/Equity to decline from 2.3x in FY10 to 0.4x by FY13E ? No further investments in Sylvania are expected except for maintenance capex
? Capital Efficiency to improve with Sylvania turnaround
? ROCE to improve from 7.6% in FY10 to 26.8% in FY13E and ROE to improve from 17.4% in FY10 to 45.7% in FY13E
Price in 5 years = Estimated Dividends in 5 Years D1 = 2.50 D2 = D1 x (1.20) = 3 D3 = D2 x (1.20) = 3.6
Current mkt price is Rs. 425 per share, an expected dividend per share next year of Rs 2.50, an EPS of Rs 20, expected EPS growth of 20% per year, and a P/E ratio of 17. Target rate is 10%. Investment Horizon is five years. Payout is Constant. Price in 5 years = P/E x EPS x (1+g)^5 = 17x20x(1.20)^5 = 846 Estimated Dividends in 5 Years D1 = 2.50 D2 = D1 x (1.20) = 3 D3 = D2 x (1.20) = 3.6
D4 = D3 x (1.20) = 4.32
D5 = D4x (1.20) = 5.18
Po = 2.50 + 3.00 + 3.6 + 4.32 + 5.1+846 = 539 1.10 1.10^2 1.10^3 1.10^4 1.10^5 Hence, the current intrinsic value is Rs. 539 giving a MOS of (539-425=114). MOS% of 27%
Current mkt price is Rs. 425 per share, an expected dividend per share next year of Rs 2.50, an EPS of Rs 20, expected EPS growth of 20% per year, and a P/E ratio of 17. Target rate is 10%. Investment Horizon is five years. Payout is Constant. Price in 5 years = P/E x EPS x (1+g)^5 = 17x20x(1.20)^5 = 846 Estimated Dividends in 5 Years D1 = 2.50 D2 = D1 x (1.20) = 3 D3 = D2 x (1.20) = 3.6
D4 = D3 x (1.20) = 4.32
D5 = D4x (1.20) = 5.18
Po = 2.50 + 3.00 + 3.6 + 4.32 + 5.1+846 = 539 1.10 1.10^2 1.10^3 1.10^4 1.10^5 Hence, the current intrinsic value is Rs. 539 giving a MOS of (539-425=114). MOS% of 27%
Current mkt price is Rs. 425 per share, an expected dividend per share next year of Rs 2.50, an EPS of Rs 20, expected EPS growth of 20% per year, and a P/E ratio of 17. Target rate is 10%. Investment Horizon is five years. Payout is Constant. Price in 5 years = P/E x EPS x (1+g)^5 = 17x20x(1.20)^5 = 846 Estimated Dividends in 5 Years D1 = 2.50 D2 = D1 x (1.20) = 3 D3 = D2 x (1.20) = 3.6
D4 = D3 x (1.20) = 4.32
D5 = D4x (1.20) = 5.18
Po = 2.50 + 3.00 + 3.6 + 4.32 + 5.1+846 = 539 1.10 1.10^2 1.10^3 1.10^4 1.10^5 Hence, the current intrinsic value is Rs. 539 giving a MOS of (539-425=114). MOS% of 27%
Havells FY13 PEG Ratio
–> 9.8/20 = 0.49
Crompton FY13 PEG Ratio –> 17.5/15 = 1.16 Bajaj FY13 PEG Ratio Philips FY13 PEG Ratio –> 10.5/15 = 0.7 –> 10.7/15 = 0.7-
Havells FY13 PEG Ratio
–> 9.8/20 = 0.49
Crompton FY13 PEG Ratio –> 17.5/15 = 1.16 Bajaj FY13 PEG Ratio Philips FY13 PEG Ratio –> 10.5/15 = 0.7 –> 10.7/15 = 0.7-
Havells FY11E FY12E FY13E 0.7 1.59 2.06
Crompton
Bajaj 1.73 2.34 2.45
Phillips 0.75 0.72 0.84
1.36 1.42 1.5
By: Ankesh Panjwani Madhav Sud Nikhil Marwah Nitin Bhalla P. Srivastava Ridhika Seth
doc_884762117.pptx