IGI Logo

Havells’ 1QFY24 revenue grew 14% YoY (+15% 4-year CAGR; 3% above JMFe and consensus) led by strong growth in Lloyd (+20% YoY; in line with JMFe) and cables and wires (+24% YoY; 8% above JMFe). ECD growth was muted at 5% YoY (+12% 4-year CAGR) on account of unseasonal rains. EBITDA grew by 11% YoY (+10% 4-year CAGR) to INR 4bn (15% below JMFe/Consensus) while Adj. PAT rose by 12% (+13% 4-year CAGR) to INR 2.73bn (13%/19% below consensus respectively). Demand continues to be driven by industrial and infrastructure segments (cables and switchgears); while consumer-facing categories remained sluggish in Apr/May’23 momentum has been picking up since Jun’23 and a healthier demand scenario is expected in 2HFY24. Ex-Lloyd margin was impacted in 1QFY24 on under-absorption of overheads coupled with stepped-up investments, and it is expected to improve from 2HFY24 and likely to revert to normalised pre-Covid levels only in the medium term. On the other hand, Lloyd’s margins are likely to remain muted over the next couple of years as the management continues to focus on RAC market share gains and ramp-up in other white goods categories. We cut our FY24/25EPS estimates by 2%/3% respectively and roll forward to Jun’24TP of INR 1,500 (earlier Mar’24TP of INR1470). We maintain BUY.

* 1QFY24 summary: The company’s 1QFY24 revenue grew 14% YoY (+15% 4-year CAGR; -1% QoQ) to INR 48.2bn and was 3% above JMFe/Consensus. Havells’ (ex-Lloyd) revenue grew 12% YoY (+14% 4-year CAGR; -2% QoQ) led by cables and wires (+24% YoY). Lloyd’s revenue grew by 20% YoY (+19% 4-year CAGR; +3% QoQ). On a 4-year CAGR basis, Electrical Consumer Durables (ECD), Cables & Wires, and Lighting and Switchgears grew 12%, 18%, 10% and 12% respectively. Excluding Lloyd and C&W segments, Havells posted a 4-year CAGR of 12%.

* Muted margins performance: Contribution margin (Havells ex-Lloyd) improved 100bps YoY to 22.4% though it declined 80bps QoQ as the softening of raw material prices is yet to reflect in margin improvement. Cables margin improved 440bps YoY / -20bps QoQ as base quarter had inventory loss due to copper price reduction. ECD margin contracted 150bps YoY/ 120bps QoQ on account of under-absorption of manufacturing overheads on unseasonal rains. Overall, gross margin expanded 140bps YoY (-10bps QoQ) while EBITDA margin declined 20bps YoY (-260bps QoQ) to 8.3%. EBITDA grew 11% YoY (+10% 4-year CAGR/ -24% QoQ) to INR 4bn (15% below JMFe and consensus). Adj. PAT grew 12%YoY (+13% 4-year CAGR / -22% QoQ), at INR 2.73bn, 13%/19% below JMFe/Consensus respectively.

* Lloyd continues to reel under margin pressure: Lloyd reported 20% revenue growth for 1QFY24 (in line with JMFe) and is estimated to have gained further market share in RACs. However, contribution margin came in at 5.1%, -110bps QoQ (under-absorption of overheads; high capacity utilisation in 4QFY23) while EBIT loss of INR 608mn (-4.7% of revenue) was higher than JMFe loss estimate of INR 325mn (-2.5% of revenue). The company continues to invest in various initiatives (manufacturing, R&D, branding,

To Read Complete Report & Disclaimer Click Here

Please refer disclaimer at https://www.jmfl.com/disclaimer

SEBI Registration Number is INM000010361

Above views are of the author and not of the website kindly read disclaimer