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Result Synopsis

Havells revenue growth miss is on back of de-growth in wires segment as there has been channel de-stocking resulting out of copper price volatility. Other B2C product categories (ex of lighting) have seen strong double-digit growth aided by festive season and improving consumer demand trends. B2B demand has been mixed bag, with Cables delivering strong volume growth while industrial switchgears have remained soft. EBITDA margins of 8.8% has been attributed to lower margins in ECD and Switchgear segment. ECD margins were impacted by product mix change while Switchgear margins were lower on back of onetime expense incurred on plant relocation and mix change. Lloyds continues to fare better in both topline growth and improving profitability which has been positive. Management expects margins in both the segments will improve Q4 onwards as mix change will be beneficial and expect switchgear segment to deliver 23-24% margin on sustainable basis. We believe margins should improve from the current levels given the favorable revenue mix and improving B2C demand.

We are factoring FY24-27E Revenue/EBITDA/PAT CAGR of 15%/21%/22%. Our EPS estimates for FY26 and FY27 have been revised downwards by 7.7% and 5.7% respectively as margin uptick will be gradual. Expect continued B2C consumer demand on back of real estate uptick and positive sentiments, while continued industrial and infrastructure led demand will result in strong B2B growth as well. Considering recent stock correction and improved demand environment with strong potential of margin improvement we upgrade the stock to ADD with PT of Rs 1,828 valuing the company at 50x FY27 EPS.

Stock performance

Result Highlights

* Revenue- Havells delivered lower than expected revenue growth. Lower revenue growth was on back of de-growth in wires segment and muted growth in lighting segment on back of price erosion. All other product segments grew in double digit.

* Margins - EBITDA margin at 8.8% contracted 115bps yoy. Contraction in ECD and Switchgear margins has resulted in overall margin contraction. Lower switchgear margin was on back of onetime factory relocation expenses, while mix change impacted ECD.

* Lloyd – Lloyd registered 14% growth with non-RAC segment registering higher growth as compared to RAC. The company’s focus is on improving profitability without compromising much on growth.

* Market share – All B2C product categories have registered market share gains. The company’s focus is to increase the share in product categories like water purifier where the market share is lower.

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