India Industrials: Home appliances: Increased competitive intensity

Research evidence excerpt

India Industrials: Home appliances: Increased competitive intensity

UpdateMValuation Methodology and Risks

Havells India Ltd (HVEL.NS)

Residual income model, probability-weighted bull 5%, base 85%, bear 10%.

Key assumptions:

n Cost of equity: 12.9% (beta 1x, risk-free rate 6.9%, market risk premium 6%)

n Terminal growth rate: bull 5.25%, base 5%, bear 4.5%

n Terminal RoE: bull 38%, base 34%, bear 28%

Risks to Upside

n Stronger-than-expected revenue growth in cash cow/growth businesses, helped by

stronger disposable income growth recovery

n Stronger-than-expected margin improvement as competitive intensity is benign, fol-

lowed by higher dividend payout

Risks to Downside

n Sharp slowdown in consumer demand

n Lloyd's turnaround taking longer than expected

n Strong competitive intensity in consumer durables business (ECD and Lloyd)

LG Electronics India Limited (LGEL.NS)

Base case, derived from a target P/E of 45x applied to our earnings estimate for March 2028.

This multiple is benchmarked to the average P/E of LGEIL's Indian consumer discretionary,

retail and consumer durables peers. We use this cohort in our valuation framework given both

consumer discretionary and retail along with durable companies have many similar macro

drivers (rising disposable income, rising urbanization, etc.).

n Stronger-than-expected revenue growth

n Market share gains

n Stronger-than-expected margin expansion

n Industry consolidation

n Tougher-than-expected macro environment

n Market share losses across key categories

n Margin contraction

n Increase in royalty payments to parentco

Voltas Ltd. (VOLT.NS)

Sum of the parts, weighted 10% bull, 80% base, 10% bear. Equal weight for bull and bear to

reflect high equivalent upside/downside in favorable/adverse weather environment and sea-

sonality.