Havells - 37% CAGR for the last 10 years
Havells is India’s largest electrical product companies, has made substantial investment into its various divisions .Its product profule range from building circuit protection equipment, industrial switchgear, cables & wires, energy meters, modular switches, fans, compact fluorescent lamps (CFL), lighting products and bath fittings.
|
CMP |
Rs 285 |
|
Market capitalization |
Rs 1530 croes |
|
Sales FY 06 |
Rs 1000.36 crores |
|
EPS FY 06 |
Rs 12.13 (Post bonus) |
|
EPS FY 07 (E) |
Rs 18.00 |
|
PE |
Rs 15.83 |
|
RoE |
48.32% |
|
Sustainable growth |
35% |
|
PEG |
0.42 |
The company ahs grown its revenues at 37% CAGR for the last 10 years and presently it trades at a PE of 15 time’s current year. The company has consistently shown growth and has been capturing market share from the leaders in the segment like Orient Fans. Havells strategy has been to leverage its brand and get into other electrical fittings and equipments whereas the C.K.Birla controlled Orient Fans never moved out of its comfort zone (fans).
Recently Havell's inaugurated its manufacturing unit at Haridwar, Uttaranchal. The plant would qualify for tax breaks and is India's largest integrated fan unit having a capacity of 2.4 Million fans/ annum. The management says that they intend to increase production capacity up to 3.6 Million fans/ annum within the next three years.
Havells products have a bit of innovation within them. They are attractively designed and are made to catch the customer’s eye The Company had launched highly efficient energy saving fans by name of ES-50 where the consumer saves on energy consumption and recovers the cost of the total fan over two years.
The electrical appliances and fittings market is volume oriented and producers lack pricing power.
Havells derives about 25% of its revenues from the consumer electrical business The Company has maintained healthy margins despite stiff competition. Havell's is the market leader in CFLs. This market is growing at 40 per cent per annum.
To cope with the increasing demand Havells is expanding capacity across various product segments.. It has recently expanded its portfolio of products by merging a group company, Crabtree India, with itself. This merger creates synergies in the premium bath fittings and switches segment. As well as in the (CFLs), lighting systems and fans that caters to the housing sector.
The company’s exports business has also evolved quite well It recently acquired a European company and appears well positioned to independently penetrate the European market. Unlike other companies which become a manufacturing hub for their foreign counterparts Havells strategy of independently getting into the European market will lead to better realization and margins.
Recommendation: Investors intending to play the Indian Construction and Housing boom should buy Havells. The stock was quite resilient in the recent fall and refused to tank with the markets. While this is no short term pick the stock should form a part of the core portfolio for above market ratuens. The earnings visibility is very high and the company should grow at more then 35% - 40% for the next 3 years.
Source: Company feedback and BSEIndia.com
Edited by basant - 30/Aug/2006 at 10:47am
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