Large Cap Stock Turns Rs 1 Lakh To Rs 59 Cr After 1 Bonus Share: Buy?

A large-cap consumer discretionary firm with a market valuation of Rs 81,640.48 Cr as of Friday's closing session is Havells India Ltd. It is one of the bluechip stocks that have made its positional investors crorepati in the long run only by 1 bonus share. Let's know how.

Havells India Financials

For the first quarter of the current fiscal year that ended in June (Q1FY24), the firm announced that its consolidated net profit jumped by 18% YoY to Rs 287.07 crore from Rs 243.16 crore in the corresponding quarter of FY23. Consolidated revenue from operations for the quarter ended June 30 (Q1FY24) rose by about 14% YoY to Rs 4,833.80 crore from Rs 4,244.46 crore in Q1FY23. The consolidated total income for the quarter under review for Havells India was Rs 4,898.64 crores, up from Rs 4,292.05 in Q1FY23. EBITDA during the first quarter of FY24 was Rs 402 crore, with an 8.3% EBITDA margin.

Havells India Share Price & Bonus Shares History

On Friday, the shares of Havells India closed on the BSE at Rs 1303.10 apiece down by 3.36% from the previous close of Rs 1348.35. The stock made a 52-week-high of Rs 1,408.00 on (20/07/2023) and a 52-week-low of Rs 1,092.00 on (26/12/2022). Havells India's stock price climbed from Rs 0.44 on July 14, 1995, to the current market price, representing a staggering return of 296.059.09%.

A shareholder would have acquired 2,27,272 shares for an Rs. 1 lakh investment in this stock if invested at the stock's initial price stage. But as per the data available on BSE, Havells India has declared bonus shares only 1 time in a 1:1 ratio and the announcement was made on 27/08/2010. After the bonus share announcement, the positional shareholders who would have remained invested in the stock would have received 454,544 shares. As a consequence, based on the current market price, the total value of the 454,544 shares is now Rs. 59.23 Crore. Hence, the shareholder would have turned his or her Rs 1 lakh to Rs 59 Cr if stayed invested in the stock for a period of 28 years.

Havells India Share Price Target

"We are positive on HAVL's Cables & Switchgears growth prospects along with improvement in Lloyd's revenue. However, margins may take time to improve given weak demand scenario in FMEG portfolio and continued loses in Lloyd. We have downward revised our FY24 earnings by 6.7% mainly with correction in margins and maintained FY25 earnings as H2FY24 is expected to see revival in demand & margins. Maintain 'BUY' at a DCF based target price of Rs1,460," said the broking firm Prabhudas Lilladher.

"We recently reinitiated coverage on HAVL with a BUY rating and a TP of INR1,580 premised on 55x FY25E EPS (similar to last five-year's average). We expect HAVL to maintain its premium valuations given: a) the 29% earnings CAGR over FY23-25 and b) strong return ratios (RoE/ROCE of 21%/20% and RoIC of 30% in FY25)," said Motilal Oswal.

"Havells remains focused on ensuring its presence across the value chain through a) increased presence in e-commerce, b) deeper penetration into India through the Rural Vistaar programme and Utsav stores, c) increased participation in B2B projects, and d) expanded footprint in international markets.

Despite expectation of softness in near-term demand owing to unseasonal rains and weak summer intensity, we like Havells long-term growth strategy through continuous portfolio and distribution expansion and brand-building initiatives. Among peers, Havells enjoys the highest margins in many product categories and generates healthy FCF despite high capex (unlike most peers, the company has opted for in-house production).

We believe the margin has hit a trough and will continue to improve from here on, given (1) softening commodity inflation; (2) an increase in the premium mix (fans: 30% vs 17% five years back) and lowering losses in Lloyd. We maintain BUY with a TP of Rs 1,545," said LKP Securities.

"We remain positive on Havells due to its established competitive advantages and growth opportunity in white goods and durables. We maintain BUY with DCF-based revised TP of INR 1,600 (implied P/E 48x FY25E)," said ICICI Securities in a note.

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.