Havell’s standalone Q4FY15 earnings missed our as well as the Street’s expectations by 5%/3%, as sales declined in switchgears and lighting and fixtures. Ebitda margins at 13.3% were below our estimate of 13.6% as well as consensus of 14.0%. This was due to a charge of R1771 crore for the quarter and R2,769 crore for FY15, relating to a full and final settlement with a customer. Excluding this impact, Ebitda margin at 14.6% is ahead of both our and consensus estimates for Q4FY15.
Segment-wise revenue numbers were below our estimates except for the electrical consumer durables segment, where revenue growth was 24.0% y-o-y, vs our estimate of 18.0% y-o-y growth. Sylvania continued to suffer from a slowdown, with revenue growth at -2.1% y-o-y while normalised Ebitda of 6.60 million euro was down 14.3% y-o-y.
We continue to believe that Havells will be a likely early-cycle beneficiary of any improvement in the economic environment, and estimate its domestic business to deliver mid-teens revenue CAGR over FY14-FY17f, driven by a pick-up in construction activity, improving consumer sentiment, new product launches and further expansion of its distribution network.
The stock has already reacted positively to the results despite inherently weak trends. We do not expect any further significant move on the back of these results.
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