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Friday, October 30, 2009

Havells India Ltd:Future growth outlook and prospects

Scripscan:Havells India Ltd

Story:Havells India Limited engages in the manufacture and sale of electrical and power distribution equipment in India and internationally. Its building circuit protection products include miniature circuit breakers, isolators, changeover switches, residual current circuit breakers, distribution boards, and indicator boards; and industrial circuit protection products comprise air circuit breakers, panel board systems, by-pass and load changeover switches, automatic transfer switches, switch disconnectors, control gears, chamber systems, fuse holders, nylon fuse bases, fuse links and fuse bases, and fuse switches and switch fuses. The company also manufactures capacitors, such as normal, heavy, super heavy, and agriculture duty capacitors; motors, including foot mounting, flange, and foot cum flange motors; cables and wires; and lighting products, such as consumer, commercial, landscape-bunker, area, and aura lighting products, as well as specialty lamps and accessories. In addition, it manufactures compact fluorescent lamps; ceiling, table, wall mounting, pedestal, air circulator, and ventilating fans; modular plate switches; and bath fittings and accessories. Havells India Limited sells its products under the Crabtree, Sylvania, Concord, Lumiance, Claude, Sylvania Linolite, and SLI Lighting brands. The company is headquartered in Noida, India.I remain positive on two year’s financial prospects of Havells India because the stock is down still a lot from its year to date. Its overall business which is in wires, cables and other electrical products is doing well and is growing at 20%. I expect about 20% growth this year and next year. Profit growth can be slightly better than that and the ROE is decent at 23%-24%. The debt equity ratio is coming down because of the investment by Warburg Pincus. So overall, I see healthy prospect and the stock’s downside is not really warranting the kind of risk that is associated with the earnings. Earnings are not under risk and 20% to 25% growth is easily achievable. So, my fair value for the stock is about Rs 500 and our target price is about Rs 450 against the current market price, which is a 50% upside from current levels.

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