While retaining neutral call on Havells India with a target price of Rs 500, Citi said the de-stocking impact on company will likely be short-lived. The stock was down 1.5 percent intraday Wednesday.
It sees de-stocking across the board impacting Q1FY18 revenue.
The research house said distribution channel across products (from light electrical products to large appliances) is seeing varying degree of de-stocking in the run-up to GST. The extent of de-stocking is higher in large appliances (room ACs) against smaller appliances.
However to counter this, the electric equipment manufacturer has started issuing separate excise invoices (which shows excise paid separately and will enable dealers to claim input tax credit).
Havells' dealers in core business (light electrical and small consumer durables) keep only 15-25 days of inventory. As a result, in core business, destocking will likely have limited impact only, the research house feels.
However, after rollout of GST from July 1 onwards, the impact of de-stocking will be behind. In fact, there is a chance that the low level of starting channel inventory may lead to a temporary surge in off-take in Q2FY18 (if demand holds up), Citi said.
The research house has maintained neutral rating given rich multiples, still tepid demand environment, and increasing competitive intensity.
It feels valuations are expensive and furthermore, there are risks to EPS growth. It believes there is limited upside despite longer-term.
At 12:49 hours IST, the stock price was quoting at Rs 464.25, down Rs 6.75, or 1.43 percent on the BSE.
Posted by Sunil Shankar Matkar
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