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Result Synopsis

Havells continues to deliver inline revenue growth with sequential margin improvement. All the segment registered growth except ECD which was impacted on account of higherinventory stocking in preceding quarter. B2B product categories saw higher growth on back of government spending on infrastructure and increase in private capex. Margins saw sequential improvement on back of stable commodity prices as most of the high?cost inventory for Havells was liquidated in Q3. Management expects core Havells margin to return to its normalized levels if commodity prices remain stable in next few quarters and it will push premium products under Lloyd to improve its margins. Management is cautiously optimistic of demand as real estate continues to see traction in construction which can lead to increased demand for wires and Switchgears initially followed by other product categories.

We are factoring FY23?25E revenue/EBITDA/PAT CAGR of 13%/28%/34%. We however have marginally increased our margin estimates considering stable commodity prices and thrust of managementin getting core Havells margin to its normalized levels. We maintain our target price to Rs 1,480 valuing the stock at 55x and reiterate our BUY rating. We foresee HAVL outperforming the industry given the work done in expanding its distribution presence in rural areas and bringing more products under REO brand increasing penetration in rural areas. This along with push for premium products in the Lloyd brand will bode well for the margins going forward.

Result Highlights

* Inline revenue growth? Havells delivered inline revenue growth as B2C demand was impacted by high inflationary environment and erratic weather, while B2B demand remained strong aiding in revenue growth. Lloyds continues to see strong
growth in AC on back of channel filling.

* Margins ?Margins have seen sequential improvement in Q4. Management expects margin expansion to continue in ensuing quarter as well. Management focus is ongetting back to its normalized levels given that commodity prices have stabilized.

* Inventory and product portfolio – Channel inventory for summer products (Fans,RAC) as of March has been higher on back of delayed and erratic summer. However, in April some of the inventory has been liquidated but it is still higher than the normal.

* Price increases – Company has not taken any price increase as raw material prices have been stable. Only price increase is on account of adoption of BEE ratings in Fans and RAC to the tune of 5?7% which is margin neutral.

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