>HAVELLS INDIA: Sylvania first debt tranche has been refinanced

■ FY13E sales growth guidance of 15%-20% and EBITDA margin of 13%-13.5% —
Given 9MFY12 performance (revenue/EBITDA/PAT growth of 25%/ 34%/44% and 90bps margin expansion in 9MFY12) and traction in lighting and consumer durable businesses (20%+ growth), FY13 guidance looks easily achievable with high possibility of actual results being closer to the higher end of guidance.


■ Sylvania first debt tranche has been refinanced — First tranche of Eur40mn due in April 2012 has been refinanced and negotiations are on for a second tranche of Eur50mn due in April 2013. With current EBITDA run rate of EUR35-36mn (which is growing) and net debt of ~Eur125mn, Sylvania is self sufficient and can service the debt over a slightly longer time horizon.


■ Raising target price to Rs633 (from Rs554) — We roll over India business P/E multiple of 18x and Sylvania EV/EBITDA of 5x from March 13E to September 13E. We have also raised our India business EPS estimate marginally by 4%/5% in FY13E/FY14E to factor in slightly higher revenues and 25bps higher EBITDA margin.
There is no change in Sylvania estimates.


■ Maintain Buy — Havells has outperformed Sensex by 46%/ 12% over the past 6 months / 3 months respectively. However, business momentum remains robust with healthy EPS growth, cash flow generation and high RoEs. We believe the stock has plenty of steam left and maintain our Buy rating.


■ Risks — Downside risks to our target price include poorer performance from Sylvania, higher commodity prices, unsuccessful new-product launches, increase in competitive intensity and demand slowdown in India


To read report in detail: HAVELLS INDIA
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