Broker picks: Nomura upgrades Havells

Nomura has upgraded Havells India to ‘Buy’ from ‘Neutral’ rating with a target price of Rs 802. It said the company intends to expand its dealer and distribution network aggressively and is planning to add around 1,500 dealers (to its current base of around 6,000) across the country in FY14F. The launch of Reo switches, targeting the rural market, would also lead to an expansion in the distribution network which will be used to push other products.

Adding that its interaction with distributors indicated that Havells has gained market share in fans from its competitors in FY13 and overall in other categories as well.Besides,its survey indicates that Havells is budgeting for aggressive growth targets in its domestic business for switches (driven by the Reo launch and increase in capacity in the Baddi plant), lighting fixtures (ongoing capacity expansion in its Neemrana plant), fans, consumer durables (driven by new launches) and wires.Nomura said its target price implies a one-year forward target EV/EBITDA target multiple of 9.6x, around 8% premium to its three-year historical average EV/EBITDA multiple.