JP Morgan 'Overweight' on Havells India

JP Morgan has assigned an ‘Overweight’ rating on Havells India with a target price of Rs 700. Havellsremains one of the best plays on branded consumer electrical products and appliances demand in India. Near term pick up in Sylvania margins bodes well for its valuations.

“We cut our FY13E EPS by 7.5% to factor in one-time interest payment by Sylvania on its debt refinancing, largely maintaining our FY14-FY15 estimates.” said JP Morgan. Havells reiterated its domestic revenue growth target of 15%-20% for FY13. Tier III/IV cities and rural areas continue to see strong growth (30%-35%) aided by rising penetration of branded products.

Havells is looking to deepen its tier III/IV city distribution and expand its range of products catering to smaller towns and rural areas. Its recent launch of REO range of switchgears is targeted at that segment and Havells expects Rs 1 billion contribution from this product in FY14E.