Buy Havells India, target Rs 835: Edelweiss Financial Services

Edelweiss Financial Services has a buy call on Havells India with a target price of Rs 835.

The current market price of Havells India is Rs 693.95.

Time period given by the brokerage is one year when Havells India price can reach the defined target.


Investment rationale by the brokerage
What’s changing across Lloyd and conventional businesses: HAVL is focusing on tapping opportunities in semi-urban cities. This, coupled with better power availability, is aiding growth, amply reflected in the company’s numbers over the past few quarters (23 per cent growth in H1FY19). In Lloyd, management envisages a uniform strategy for dealers and focus on new geographies to boost growth. Healthy infrastructure-led demand is driving HAVL’s cables, wires and switchgears businesses.

Significant ramp up in investments; back-ended benefits: The company has ramped up investments in people, distribution and technology platforms over the past two years. HAVL is extending its manufacturing/R&D-backed product strategy for the white goods business, which it envisages to make it self sufficient in the Lloyd business going ahead. In our view, potential for significant scale in Lloyd and conventional businesses will yield better returns over the ensuing three-five years given HAVL’s front-ended investments.

Outlook and valuations- Eye on future; maintain ‘BUY’: HAVL is focusing on a differentiation-product basket, distribution and branding reach. In our view, this opens avenues for the company to become the only player with dominant market shares across most electrical/white goods verticals. We maintain ’BUY/SO’ with a target price of Rs 835.