LKP Securities has recommended a ‘buy’ on Havells India, with a target price of ₹1,453, representing a 12.7 per cent increase over the stock’s closing price of ₹1,289.05 on July 5. Shares of Havells India gained over 1.5 per cent to touch an intra day high of ₹1,293.65, setting 0.9 per cent higher at ₹1,289.05 apiece during the trading session on Wednesday. The stock quotes a 52-week high price of ₹1,405.85 with an upper price band of ₹1,417.95, according to BSE data.
The brokerage house sees a potential upside of 14 per cent on Havells India with a 12 M target price of ₹1,453 due to the company’s constant focus on value creation, improving margins, and sustained growth of dealer network with robust returns in the past few years. On July 5, the counter saw a traded volume of 5,51,843 shares with a traded value of ₹7,099.41 lakhs, according to NSE data.
According to LKP Securities, Havells remains focused on ensuring its presence across the value chain due to the following reasons:
-Increased presence in e-commerce
-Deeper penetration into India through the Rural Vistaar programme and Utsav stores
-Increased participation in B2B projects
-Expanded footprint in international markets
Despite expectation of softness in near-term demand owing to unseasonal rains and weak summer intensity, the brokerage is firm on Havells’ long-term growth strategy through continuous portfolio and distribution expansion and brand-building initiatives.
Among peers, Havells India enjoys the highest margins in many product categories and generates healthy free cash flow despite high capex (unlike most peers, the company has opted for in-house production), according to the brokerage firm.
‘’We believe the margin has hit a trough and will continue to improve from here on, given (1) softening commodity inflation; (2) an increase in the premium mix (fans: 30 per cent vs 17 per cent five years back) and lowering losses in Lloyd. We recommend BUY with a TP of ₹1,453,” said LKP Securities in its rsearch report on July 5.
According to LKP Securities, Havells has devised a comprehensive strategy to maximise value creation by focusing on brand, omnichannel, innovation, digitisation, and talent.
Apart from strengthening its tie-ups with multi-brand outlets, regional retailers, and modern formats, the company has increased its presence on new age digital platforms like the e-commerce marketplace and the company managed O2O portal. The company’s dealer network grew at 13 per cent compound annual growth rate (CAGR) between FY19 and FY23 from 10,500 to 17,000.
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Updated: 05 Jul 2023, 11:24 PM IST