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Revenue in line; OPM a bit lower than estimate

* Havells (HAVL)’s 3QFY25 revenue grew ~11% YoY to INR48.9b (in line), led by improved consumer demand during the festive season and strong infrastructure and industrial demand. However, EBITDA declined ~1% YoY to INR4.3b (~7% miss) and OPM contracted 1.1pp YoY to 8.7% (50bp below our estimate). PAT dipped 3% YoY to INR2.8b (~13% below estimate) due to higher-than-expected depreciation and lower-than-estimated other income.

* Commodity fluctuations impacted wire growth, resulting in moderate revenue growth overall in the C&W segment. Healthy real estate and projects businesses are driving domestic switchgear demand; however, industrial switchgear demand remains soft.

OPM contracts 1.1pp YoY to ~9%

* Consolidated revenue/EBITDA/PAT stood at INR48.9b/INR4.3b/INR2.8b (up 11%/down 1%/down 3% YoY and down 1%/7%/13% vs. our estimates). Gross margin improved 1.2pp YoY to ~34% (+1.2pp vs. our estimate). AD spend was at 3.7% of revenue vs. 4.0%/2.9% in 3QFY24/2QFY25.

* Segmental highlights: 1) HAVL revenue (excl. Lloyd) increased ~10% YoY to INR41.5b. C&W revenue grew ~7% YoY to INR16.9b and EBIT margin increased 75bp YoY to ~11%. Switchgear revenue rose ~11% YoY to INR5.8b and EBIT margin contracted 5.7pp YoY to ~18%. Lighting revenue grew 3% YoY to INR4.5b and EBIT margin expanded 60bp to ~15%. ECD revenue rose 15% YoY to INR11.0b and EBIT margin declined 2.4pp YoY to 8.6%. 2) Lloyd revenue grew ~13% YoY to INR7.4b. The company reported a loss of INR361m vs. INR654m in 3QFY24 (our estimated loss of INR259m).

* In 9MFY25, revenue/EBITDA/PAT grew 16%/14%/16% YoY. OPM margin was down 20bp YoY at ~9%. Among segments, Lloyd/ECD/C&W revenue grew 32%/17%/11% YoY, while Switchgear/Lighting revenue grew 7%/2%.

Valuation and view

* HAVL’s lower-than-estimated revenue in C&W and lighting segments was offset by higher-than-estimated revenue in Switchgear and ECD segments. The EBITDA miss was attributed to 1) lower margins in Switchgear due to a mix change toward project business during the quarter and factory underabsorption on account of plant relocation, and 2) higher-than-estimated loss in Lloyd.

* The stock is currently trading at 54x/43x FY26E/FY27E EPS. We have a Neutral rating on the stock. However, we will review our estimates after the concall on 17th Jan’25 (Concall Link).

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