Prabhudas Lilladher calls a ‘Buy’ on Voltas
CMP: Rs. 97 Target Rs. 127
Margin improvement drive earnings surprise: Voltas reported numbers which was ahead of our and street estimate by reporting better-than-expected margin for the quarter. It reported EBIT margin of 8.3% in the MEP segment (100bps improvement QoQ). The improved margins were primarily driven by improved follow-up, leading to recovery of variation claims in few old projects. Sales reported de-growth of 5.8% YoY at Rs 15.7bn lower than our expectation of Rs 17.1bn. PAT was up 7% YoY to Rs 1.04bn.
Update on Sidra Project: Sidra Medical and Research Centre Hospital project in Qatar is ~67% complete. Voltas has taken a hit of Rs 3.2bn in FY12 on this project. The company believes that the execution of the Sidra project will get extended beyond FY13 as client continues to make changes in the project design. Voltas will conduct a techno commercial study in July-August to assess if any further provisions are required in the project.
Outlook on ordering: Voltas ended the year with an order book of Rs 42.3bn, down 12% YoY. It bagged orders worth ~Rs 23bn in FY12 and Rs 4.5bn in Q4FY12. In the international markets, the company has started seeing some signs of revival, especially in the Dubai markets and expects to see more traction over the next six months.
Upgrade to Accumulate: The stock is trading at 10.8x FY14E earnings. We believe that the worst might be behind us, given the large part of provision on Sidra project has already been accounted for. Write-back from Sidra project could provide positive surprises. The outlook might be slightly muted in the near term on order flow, given the increased reach in terms of geography in international markets and business segments in the domestic market. This should help order flow once cycle turns. We believe that a lot of pessimism related to order flow is in the price and hence, downside seems to be limited. We upgrade the stock to ‘Accumulate’ from ‘Reduce’
Emkay calls a ‘Buy’ on Havells
CMP: Rs. 529 Target Rs. 600
Results in line, but misses EBIDTA margins - revenues grew 24% yoy to Rs 10.5bn led by C&W and Lighting; EBIDTA margins rose 30bps to 12% & APAT at Rs 915mn, up 33% yoy. C&W and L&F segment drive revenue growth in the quarter, but product mix change (lower contribution from Switchgear) and warranty cost impacts our EBIDTA margins estimates. Sylvania revenues flattish at € 112mn impacted by de-growth in Europe and LATAM, while EBIDTA margin stays at 8.5%. Maintain focus on higher profitability led by operational gains. Minor deviation this quarter. Standalone growth to remain intact led by distribution network, while Sylvania to continue gain profitability. Maintain Buy with TP of Rs 600/Share.
Results in line with expectations, but misses on quality: (1) Revenue growth stood at 24.2% yoy to Rs10.5 bn led by growth in cables & wires and lighting segment. (2) EBIDTA stood at Rs1.3bn, up 27% yoy (3) EBIDTA margins rose 30bps yoy to 12%, but it was below our estimates of 13% largely due to product mix change (reflected in gross margins) and inclusion of warranty cost (4) APAT for Q4 FY12 stood at Rs 915mn, up 33% yoy.
Healthy revenue growth led by Cables & Wires and Lighting segment: All the segments continued to grow at a healthy pace with Cables & Wires (C&W) and lighting & fixtures (L&F) segment leading the pack C&W grew by 32% yoy to Rs4.8 bn driven by strong traction in domestic cables division. For FY12, C&W posted 29% yoy growth to Rs 12.3bn led by 12% volume growth in cables and 19% volume growth in wires.
Maintain positive bias, Rollover valuations to FY14E EBIDTA: Havells reported an inline quarter, albeit minor deviation in EBIDTA margins. Rising distribution coupled with higher contribution from new products has led to healthy growth in domestic business. Although Sylvania posted revenue decline in Europe & Latin America, it continues to deliver strong profit growth led by richer product mix, improvement in price realizations and cost rationalization. The management seems confident of achieving 15- 20% domestic revenue growth in FY13-FY14, while it expects Sylvania to continue its improvement in operational performance. We continue to maintain our positive bias on the stock and rollover our valuations to FY14E. We maintain ‘BUY” rating with revised price target of Rs 600, thereby implying a target multiple of 8.6x FY14E EV/EBIDTA. Currently, Havells is trading at 7.8x FY14E EV/EBIDTA.