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C&W surges; Lloyd firmly in the green

Havells India (HAVL IN) top line grew 20% in Q4FY25, as we had estimated, led by rise in room air conditioners (RAC) stocking by secondary channels in anticipation of robust Summer demand, and surge in the cables & wires (C&W) segment, driven by new capacity contribution. However, margin remains under pressure due to commodity price fluctuation, the impact of overheads (related to relocation of the switchgear factory) and subdued demand in Electrical Consumer Durables (ECD). However, this quarter saw Lloyd post a 6% margin and turn firmly profitable. We reiterate Accumulate with a TP of INR 1,700 based on 43x March 2027E P/E. We remain positive on HAVL as a long-term play in the electricals industry

Robust RAC primary sales but secondary remains slow: Lloyd reported good performance in Q4FY25, up 39% YoY, led by robust stocking by secondary sales channels in anticipation of strong Summer demand, and partly due to low base. Operating leverage benefits and focus on profitability also showed results as Lloyd posted margin of 6.1% in Q4FY25, up 330bp YoY. However, management says secondary sales during March-April has been weak, due to a delayed Summer in southern and northern regions. As a result, growth in Q1FY26 may be low, further hit by high base of Q1FY25. The company has stated it is adequately stocked compressors to cater to near-term demand and will not be affected by the recent sourcing issues facing the industry

C&W sales improves led by new capacity, higher copper prices: The C&W segment saw robust 21% YoY growth in Q4, led by strong demand coupled with the new cables plant being commissioned and beginning to contribute to overall sales. Copper prices also increased in Q4, which further bolstered sales. The company has announced a capex of INR 20bn for the next two years, a majority of which will be utilized to expand C&W capacity

Focus on margin expansion led by operating leverage: With Lloyd turning profitable, the company is shifting its focus to expanding margin for other segments, driven by operating leverage once new capacity increases production. It targets to improve margin to 13-14% in the long term. It has recently announced an investment of INR 6bn in Goldi Solar to scale up its renewables segment presence, ensuring a steady supply of solar panels & cells, and gradually scale up sales & margin of its renewables segment.

Reiterate Accumulate with a higher TP of INR 1,700: We lower FY26E and FY27E EPS by 2% each, as increasing competition should delay margin expansion in electricals, and the nearterm outlook of RAC looks to be slower than we had expected. We introduce FY28 estimates. We reiterate Accumulate with a higher TP of INR 1,700 from INR 1,610 based on 43x (from 40x) March 27E P/E. We retain our positive stance on HAVL due to profitability of Lloyd, its well-diversified product portfolio, industry-leading market share, investment in capacity creation across products and pricing power. We expect an earnings CAGR of 28% during FY25-28E with an average ROE of 25% and a ROCE of 24% during FY26-28E.

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