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In Q1FY25, Havells posted revenue of INR 57.2bn up 20% YoY (In-line JMFe), 5 years CAGR of +16% mainly driven by strong growth in Lloyd and ECD of c.47%/20% YoY respectively. EBITDA at INR 5.7bn up 43% YoY (below JMFe) and 5 year CAGR +16%. OPM at 9.9% vs 8.3% YoY and 11.7% QoQ, lower margins mainly because of increase in A&P to 3% (as % of sales) vs 2.4% YoY and decline in switchgears and W&C margins. PAT stood at INR 4.1bn up 43% YoY.

* Improved traction in ECD: Revenue in ECD grew 20% YoY (5 year CAGR +13%) mainly driven by strong growth in Fans and improved traction in the small domestic appliances on the back of favourable season, premiumization and new launches. All the above resulted in improvement in contribution margins from 22.6% to 24.1% YoY.

* Wires impacted while strong growth in Cables: Revenue in W&C segment was up 2% YoY to INR 15.2bn. Wires growth was lower mainly due to channel destocking led by sharp decline in commodity prices in June-24; however, management expects stocking to normalize from July. In Cables; Havells witnessed strong growth from power cables and with new capacity expansion, it expects strong opportunity from export (US) and domestic. It has started receiving various approvals for export from the US market and expects all the approvals in next 9-12 months.

* Lloyd started showing strong performance: Lloyd grew c.47% YoY (5yr CAGR +24%) to INR 19.2bn mainly driven by strong volume growth and price realisation on the back of strong summer. Operating leverage + Premiumization + cost optimisation resulted in improvement of contribution margin to 13.2% vs 5.1% YoY and EBIT margin to +3.5% vs.-4.7% YoY. Havells continue to invest in Lloyd and will expore opportunites in Ref and Washers along with export of RAC’s. Overall A&P in Lloyd was c.4% vs 2% Havells S.A.

Outlook and valuation: In the short term (Ex. Lloyd) – Consumer demand and growth momentum is expected to pick-up mainly led by - strong season, pick-up in real estate and capex cycle. Also, consumer sentiments started improving for kitchen and domestic appliances. Medium/long term (Ex. Lloyd) – core volumes should rise on: (1) Pickup in construction activity, (2) demand improvement from tier 2/3 cities, and (3) market share gains from unorganised players. We see revenue CAGR of 15% over FY24-FY27e (ex. Lloyd). For Lloyd, short/medium term we expect Llyod growth to beat industry growth and will see market share gains mainly because of improved distribution network + own manufacturing (supply chain) + improved product offerings. Medium/long term, we expect: (1) completion of appliances portfolio, (2) benefits from own domestic manufacturing and (3) opening of export opportunity and PLI – to result in a growth of 28%/15%/15% in FY25/FY26/FY27 in Lloyd. We now value Havells at P/E of 53x on Sept,26 EPS (earlier 55x on Mar,26 EPS) based on its strong brand, distribution, in-house manufacturing, opening up export opportunity, market share gain, strong balance sheet and improved ratios. Our TP is INR 2,070 (earlier 1,930) and Maintain BUY.

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