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Lloyd & ECD lagged, dragging revenue down

Quick Pointers:

* W&C revenue grew 27.1% YoY supported by volume growth of 20%-21%

* Lloyd declined of 34.1% YoY & reported EBIT loss of Rs 209mn

We downward revise Havells FY26/27 earnings by 6.4%/6.0% to factor in the weak performance of Lloyd and ECD in current quarter, heavy compliance cost and pressure from inventory liquidation .while Havells reported strong growth in W&C segment with a volume growth of 20-21%. ECD and Lloyd segment declined due to unseasonal rains, product mix change and weak summer. Inventory levels of RAC are high at company level, which is expected to normalize in coming quarters. Company plans to double its underground cable capacity by FY27, with its new Tumkur facility already ramping up production, as the company sees strong medium-term growth opportunities driven by robust domestic and export demand. Goldi Solar is planning backward integration by moving into solar cell production, which will help Havells expand its solar portfolio. We estimate revenue/EBITDA/PAT CAGR of 12.6% / 16.6% / 16.7% with ECD/Cables/Lloyd revenue CAGR of 9.4%/17.7%/9.0% over FY25- 27E and EBITDA margin of 10.5% by FY27E (+70bps). Maintain ‘ACCUMULATE’, with TP of Rs1,645 (earlier Rs1,718), based on DCF, which implies 52x FY27E earnings

Revenue declined 6.0%, PAT declined 14.7% YoY: Revenues decline by 6.0% YoY to Rs54.5bn (PLe: Rs 59.7bn). ECD (contributed 17% to revenue) decline by 14.0% YoY to Rs9.1bn due to low demand for fans and air coolers. Lloyd revenues decline by 34.1% YoY to Rs12.7bn due to weak summer and high base. W&C revenues grew by 27.1% YoY to Rs19.3bn, supported by robust volume growth. EBITDA decline by 9.9% YoY to Rs5.2bn (PLe: Rs5.3bn). EBITDA Margin contracted by 40bps YoY to 9.5%. (PLe:8.9%). Advertising & sales promotion spends stood at 2.6% of sales (down 17.1% YoY). In terms of segmental EBIT margin, Cables came in at 12.6% (+130bps), Lighting at 12.0% (-430bps YoY), ECD at 8.7% (-220bps), Switchgear at 23.4% (-120bps YoY), and Lloyd at -1.6% (-490bps). PBT decline by 14.4% YoY to Rs4.7bn. PAT declined 14.7% YoY to Rs3.5bn (PLe: Rs3.5bn).

ConCall Takeaways: 1) ECD segment declined primarily due to weak demand for fans and air coolers, weak summer demand and early rains. 2) Lloyd had a weak quarter but continues to maintain margins, with no plans for heavy discounting during the off-season. 3) Company aims to maintain Switchgear’s contribution margin in range of 38% to 40%. 4) W&C segment reported 20–21% volume growth, with equal contribution from wires and cables. 5) company expects strong growth in solar portfolio, and likely to rise its revenue from Rs5bn in FY25 to Ra10bn–15bn in next few years. 6) Havells remains positive on its lighting business and continues to invest despite price deflation and maintaining industry-leading margins. 7) Rural region currently contribute 5–6% of overall revenue but are growing faster than urban markets. Havells plans to drive this growth by expanding distribution and launching Lloyd products through its UTSAV stores. 8) Havells plans to double underground cable capacity by FY27, with gradual capacity ramp-up and production already underway at the Tumkur facility. 9) Goldi Solar is undertaking backward integration by setting up solar cell production over the next 18months, and a potential to entry into battery storage.

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