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Subdued performance: Havells India posted subdued performance for the quarter as revenue grew by 6.9% YoY/13.2% QoQ to Rs 4,414 Cr mainly led by Cables & Wires segment as a result of strong demand from infrastructure and housing development. Its other segment; Switchgears, ECD (Electronic Consumer Durables) and Llyod reported low to mid-single digit growth as compared to last year, indicating lower than anticipated demand across the durables category. Consequently, PAT grew by 1.5% YoY/15.6% QoQ to Rs 288 Cr with a margin of 6.5%.

Mixed trend in margin: Gross profit came in at Rs 1,469 Cr, up by 7.9% YoY/13.2% QoQ while margin was sustained at 33.3% which expanded by 29bps YoY. EBITDA was reported at Rs 3.9% YoY/18.3% QoQ to Rs 440 Cr while margin declined by 30bps YoY to 10%. Raw materials in proportion to sales largely remained in a similar range, however, ad spends were higher by 38% YoY/108.4% QoQ amid festive period which suppressed margin expansion impacting profitability further.

Cables & Wires continue to drive the growth: Revenue from C&W segment came in at Rs 1,573 Cr, up by 11.4% YoY/7% QoQ largely driven by healthy volume in the wires category. The segment profit was flat against last year while it declined by 4.3% sequentially to Rs 163 Cr, impacting from product mix. It is under process of expanding its underground cables capacity by 25% which will be operational by FY25, shall result in double digit volume growth in the cables category.

Llyod continues to post losses: Despite the festive period, Llyod revenue grew by 7.5% YoY to Rs 656 Cr indicating high competition amid low consumer demand. Its contribution margin improved by 370bps YoY to 7.4%, however, EBIT loss extended further to Rs 65 Cr as compared to Rs 60 Cr in the same period last year due to ad spends on the segment. As the company looks to expand its capacity, enter into new geographies and aims to gain market share, it will continue to focus on brand building activities and channel penetration which will drive the topline growth while the profitability of the segment could remain impacted in the coming quarters.

Outlook & Valuations: Havells has wide presence in consumer durables space like Switchgears, Cables, Lighting, ECD, TV and ACs. The commencement of expanded capacity of Cables and Llyod business shall transcribe into volume growth across these segments. Governments focus on improving infrastructure, sustained momentum in real estate activities as well as penetration in the international markets shall drive volume and revenue growth for the company. Financially, we anticipate its revenue/EBITDA/PAT to grow at a CAGR of 14.8%/20.8%/23.6% over FY23-26E. Factoring this, we maintain our Buy with a target price of Rs. 1,551, valuing the company at a PE of 48x on FY26E EPS.

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