IGI Logo

Demand remains soft as margins contracts

Havells reported 19.7% YoY revenue growth in Q1FY27, supported by resilient demand across categories despite raw material inflation and geopolitical uncertainties. Company revised its segment reporting by carving out Renewables as a separate segment, while reclassifying Solar, Solar Pumps and EVSE from Switchgears/Others and Water Purifier and Personal Grooming from Others to ECD, with comparative numbers restated. Cables delivered strong 27% YoY value growth, while volumes remained broadly flat due to raw material price volatility. ECD demand remained moderated despite calibrated price hikes. Lloyd recorded 15.7% YoY value growth, while RAC volumes grew in single digits. The company implemented calibrated price hikes averaging 7-8% to offset raw material inflation and expects elevated A&P spends (4.4% of revenue) in Q1FY27 to normalize over the rest of the year. Management has guided for ~INR14bn capex in FY27, including ~INR8bn towards Cables, ~INR2bn for a new R&D centre and the balance for other segments. Renewables delivered robust growth, supported by strong demand for solar panels, with management remaining positive on the long-term growth opportunity. We estimate revenue/EBITDA/PAT CAGR of 17.0% / 17.1% / 19.4% with ECD/Cables/Lloyd revenue CAGR of 12.2%/19.9%/15.1% over FY26-28E and EBITDA margin of 9.8% by FY28E. We downward revise our FY27/28 earnings estimates by 5.7%/0.9% factoring in higher A&P spends and raw material inflation. We maintain our ‘ACCUMULATE’ rating with a revised TP of INR1,319 (earlier INR1,328) based on DCF, implying 40x FY28E earnings

Q1FY27 Financial Performance:

Revenues grew by 19.5% YoY to INR65.2bn (PLe: INR62.9bn). Gross margins contracted by 210bps YoY to 31.3% (PLe: 33.4%). EBITDA declined by 9.4% YoY to INR4.7bn (PLe: INR5.6bn). EBITDA margin contracted by 230bps YoY to 7.2% (PLe: 9.0%). Advertising & sales promotion spends stood at 4.4% of sales. In terms of segmental EBIT margin, Cables came in at 10.4% (-220bps), Lighting at 10.4% (-160bps), ECD at 5.2% (-270bps), Switchgears at 20.8% (-260bps YoY), Renewables at 2.7% (-940bps YoY), Lloyd at -3.9% in Q1FY27, and Other at 4.9% (+150bps). PBT declined by 16.5% YoY to INR3.9bn (PLe: INR4.9bn). PAT declined by 16.5% YoY to INR2.9bn (PLe: INR3.7bn).

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

SEBI Registration No. INH000000271