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Topline up; margin recovery delayed

Havells India’s (HAVL IN) topline grew 11% in Q3FY25, as estimated, led by festival seasonled demand in ECD and at Lloyd. However, margins continued to remain under pressure due to destocking in wires, the impact of overheads (related to the relocation of the switchgear factory) and change in product mix in ECD. Lloyd continues on its path to achieve break-even, with profitability expected in FY26. We reiterate Accumulate with TP pared to INR 1,750 (from INR 1,930) due to a delay in margin normalization, but remain positive on HAVL as a long term play in the electricals industry.

Festival season-led boost to ECD, AC stocking drives sales: The ECD segment and Lloyd grew a robust 15% each, as festival season-led demand catalyzed sharper growth for small appliances, and RAC demand rose due to stocking (in anticipation of strong summer sales). The Cables & Wires segment witnessed a muted 7% growth (cables volumes up 11%, wires down YoY), as copper price fluctuations led to destocking in wires. Switchgears rose 11% YoY, led by real estate and project business, and others also saw a spike of 23% YoY. The lighting & fixtures segment grew 4% YoY – Volume growth of 14% was offset by continued price deflation.

Capex for cables and refrigerators – INR 18-20bn planned in two years: As per HAVL, a capex of INR 8-10bn has been planned for FY25 and FY26 each, of which ~threefourths will be used to expand C&W capacity and the new refrigerator plant for Lloyd. HAVL announced a capex of INR 4.8bn in Q3 for a new refrigerator facility at Ghiloth, Rajasthan, which will help improve segmental margin. Currently, HAVL only engages in trading refrigerators. The balance will be used for annual maintenance capex.

Margins falter led by destocking in wires, relocation of switches plant and mix change: Segmental margins were mixed (overall trend down in Q3) due to destocking in wires, unfavorable product mix in ECD and relocation of the switches factory (resulting in under-absorption of overheads in Q3). EBIT margin for Cables rose 70bps YoY to 11.1%, partially hit by a drop in wires, while Lighting & Fixtures rose 40bps to 14.6%, but for switchgears fell 590bps to 18.2%.ECD dropped 260bps to 8.6% and others 360bps to (2.0)%. Losses at Lloyd reduced from INR 652mn in Q3FY24 to INR 361mn in Q3FY25, likely led by a strategy change (from market share gain to margin improvement). The management has guided for all-round margin normalization in Q4

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