ICICI securities have initiated coverage on Havells with a ‘BUY’ recommendation and Target Price Rs. 1,644. The company expects Havells to report a PAT CAGR of 27.2 percent over FY22-FY24E and RoE to be upwards of 20 percent over FY22-24. Brokerage remains positive on business model on the back of strong moats and growth opportunities. Havells has laid key focus on expanding its reach to customers in its Annual Report. Furthermore, the company is now also investing in extending its rural presence by launching new exclusive stores.
ICICI securities believe distribution expansion and steady launch of new products could help the company to continue recording a healthy volume growth. As a distribution strategy, Havells aims to be present in all those channels to become an omni-channel player. Brokerage believes this will allow the company to increase its channel penetration and geographical expansion. Havells is among most penetrated FMEG company in rural markets, with direct presence in 3,000 rural towns (40,000 retail outlets). Brokerage believes increased retail penetration has likely resulted in strong revenue growth and volume market share gains for the company. Brokerage believes healthy volume growth of early teens likely to continue. It remains structurally positive on the company due to its competitive advantages and growth opportunity in consumer durables.
Highlighting some key factors from Chairperson’s speech and management discussion in annual report. The company says, ‘Inadequate price hikes due to increased competition intensity impacted the profitability of the segment’. The company is now investing in exclusive stores in rural markets as well named as ‘Utsav.’ In terms of convenience, highlighting current trend company says that customers seek borderless shopping. Havells is focussing on omni-channel strategy to reach customers through both traditional retail shops as well as modern formats. The management believes input inflation challenges are short term in nature, and the prevailing strong demand in the market will lead to recovery in profitability.
