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Estimate beat driven by broad-based growth Lloyd under pressure; expansion and renewables to drive growth

* Havells India’s (HAVL) 2QFY27 operating performance was above our estimate, driven by revenue beat across key segments and higher margin in switchgear. Revenue/EBITDA grew ~35%/31% YoY to INR64.3b/INR5.7b (~12%/14% beat). OPM contracted 30bp YoY to ~9%. PAT increased ~10% YoY to INR3.5b (~6% beat, partly offset by higher depreciation/lower other income vs. our estimates).

* Management indicated steady consumer demand in 2QFY27, with revenue growth led by balanced volume and value expansion across core categories. Cables & Wires (C&W) and Switchgear delivered near double-digit volume growth. C&W contribution margins contracted ~380bp YoY due to aluminum price movements, while Switchgear’s contribution margin recovered to ~38- 39%. Lloyd posted healthy revenue growth, led by RAC demand during the second summer season and volume growth in refrigerators. Profitability remained weak due to seasonal under-absorption of fixed cost and commodity inflation.

* We cut our EBITDA estimates by ~5%/8% for FY27E/FY28E due to continued margin pressure and higher losses in the Lloyd business. At CMP, HAVL is trading fairly at 47x/41x FY27E/FY28E EPS. We reiterate our Neutral rating with a TP of INR1,060 (based on 40x FY28E EPS).

Weak C&W margin; switchgear margin recovers

* HAVL’s consol. revenue/EBITDA/PAT stood at INR64.3b/INR5.7b/INR3.5b (+35%/+31%/+10% YoY and +12%/+14%/+6% vs. our estimate). Gross margin contracted 4.3pp YoY to ~31%. OPM contracted 30bp YoY to ~9%. OPM (exLloyd) stood at ~11% (down 1.0pp YoY; 20bp below our estimate). Ad spending stood at 2.1% of revenue vs. 2.8%/4.4% in 2QFY26/1QFY27.

* Segmental highlights:

1) HAVL’s revenue (excl. Lloyd) increased ~35% YoY to INR58.1b. C&W’s revenue grew ~48% YoY to INR30.0b, and EBIT margin contracted 3.6pp YoY to ~10%. Switchgear revenue increased ~31% YoY to INR7.8b, while EBIT margin expanded 3.1pp YoY to ~25%. Lighting revenue increased ~7% YoY to INR4.6b, while EBIT margin contracted 2.8pp YoY to ~10%. ECD revenue increased ~11% YoY to INR10.7b, and EBIT margin expanded 1.1pp YoY to ~6%.

2) Lloyd’s revenue grew ~28% YoY to INR6.2b. Segment loss was INR1.1b (similar to 2QFY26).

* In 1HFY27, revenue/EBITDA/PAT stood at INR129.5b/ INR10.4b/INR6.4b (+27%/+9%/-4% YoY). OPM contracted 1.3pp YoY to ~8%. Operating cash outflow was at INR1.6b vs. INR3.8b in 1HFY26, and capex stood at INR6.5b vs. INR7.0b. Net cash outflow stood at INR8.2b vs. INR10.8b in 1HFY26.

Key highlights from the management commentary

* The company implemented price hikes of ~10-25% across categories over the past 12 months, with C&W seeing increases of over 30%. Further price increases of ~5-7% are likely in 3QFY27 (varying by product) to offset cost pressure.

* Exports account for ~15% of sales, with healthy traction in both volume and value. Management expects the positive growth trend to continue in the coming quarters.

* Capex guidance remains at INR14b for FY27, focused on underground cables and R&D facilities.

Valuation and view

* HAVL’s 2QFY27 performance was above our estimates, driven by stronger-thanexpected revenue growth across segments and recovery in switchgear margins. Lloyd’s refrigerator business contributed positively to volume growth following the commissioning of its manufacturing facility. The company continues to diversify its product portfolio beyond RACs, aiming to reduce their share to ~60% from the current ~75% over time. Continued raw material cost inflation and delayed price pass-through remain key monitorables for margin recovery. Moreover, increasing competitive intensity in wires remains a key near-term challenge.

* We expect HAVL to report a revenue/EBITDA/PAT CAGR of ~16%/10%/4% over FY26-28E. We estimate C&W/ECD/Lloyd/other segment revenue CAGR in the range of ~14%-20% and ~5%-7% for lighting/switchgear segments. We estimate its OPM at 8.7-8.8% over FY27-28. We estimate RoE and RoCE of ~14% (each), lower than the historical average.

* HAVL trades fairly at 47x/41x FY27E/FY28E EPS. We reiterate our Neutral rating with a TP of INR1,060, based on 40x FY28E EPS.

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