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Expanding product range amid a mixed demand environment

Havells India (HAVL)’s FY26 Annual Report underscores the company’s transformation journey into a comprehensive, mass-premium ‘home solutions’ franchise, with a presence across 24 product categories spanning everyday consumer needs as well as B2B applications. The company continues to deepen its integration into modern households through a wide portfolio—ranging from cables and switchgears to appliances and lighting—while expanding into emerging areas like rooftop solar and EV charging. In FY26, the electrical equipment industry experienced a mixed demand environment. Consumer-facing segments saw intermittent softness, mainly due to the subdued summer season, while infrastructure and industrial segments sustained relatively stronger momentum. It also witnessed encouraging traction in its renewable energy initiatives, particularly rooftop solar. Here are the key highlights:

* Subdued consumer demand weighs on FY26 performance:

HAVL posted subdued growth in FY26 due to softness in consumer demand. With nearly one-third of the company’s revenue accruing from cooling products such as air conditioners, fans, air coolers, and refrigerators, the overall performance was significantly affected by the subdued summer season. However, industrial and infrastructure-led demand remained strong and drove revenue growth YoY. The latter part of the year was marked by geopolitical uncertainties in West Asia, which drove commodity inflation, logistics cost escalation, and currency-related input cost pressures.

* FY26 performance highlights:

a) P&L highlights: Revenue grew ~3% YoY to INR225.3b, with ex-Lloyd revenue rising ~11% YoY. However, Lloyd's revenue declined ~23% YoY. EBITDA grew ~3% YoY to INR22.0b, as EBITDA margin largely remained flat YoY at 9.8% in FY26. Adj. PAT was up ~4% YoY to INR15.2b

b) cash flow and balance sheet highlights: OCF stood at INR15.7b vs. INR15.1b in FY25. The OCF/EBITDA ratio remained stable YoY at ~71%. Capex stood at INR14.2b vs. INR7.2b in FY25. FCF stood at INR1.5b in FY26 vs. INR7.9b in FY25. Net cash balance declined to INR23.6b (vs. INR33.8b in FY25)

c) working capital and return ratios: net operating working capital was largely stable YoY, as higher inventory days due to elevated RAC inventory amid weak demand were offset by lower trade receivable days. Return ratios declined due to lower asset turnover (RoE/RoCE at ~16%/15% in FY26 vs. ~18%/17% in FY25).

* The ‘ONE Havells’ initiative aims to drive consistency and reach:

A key strategic initiative during the year was the rollout of the ‘ONE Havells’ framework, aimed at simplifying channel engagement, enhancing consistency, and strengthening the distribution ecosystem. Its evolution into a “house of brands” with six distinct offerings enables it to cater across price segments, strengthening both reach and positioning. It maintained focus on innovation, distribution expansion, and in-house manufacturing capabilities, while navigating near-term headwinds and positioning itself for gradual, long-term value creation. The company’s strategy continues to be anchored in five priorities – brand, omnichannel, innovation, digitization, and talent.

* Valuation and view:

*HAVL’s Lighting/ECD segments, which contribute over 25% of the company’s revenue, have seen subdued CAGR in the range of ~5-6% over FY22-26 due to weak consumer demand, higher competitive intensity, and price deflation (mainly in lighting). The switchgears/cables/others segments posted a healthy CAGR of ~10%/17%/23 over FY22-26, led by strong underlying demand drivers (in cables/switchgears) and entry into new emerging businesses such as solar rooftop (in others). Lloyd has posted ~15% CAGR, led by increasing traction in RAC and other products (washing machines/refrigerators). Overall revenue CAGR was ~13% over FY22-26. However, the EBITDA/PAT CAGR was ~6% (each) over FY22-26 due to lower margins, as it has seen margin contraction across segments, barring cables and wires, where margin improved.

* We expect HAVL to report a revenue/EBITDA/PAT CAGR of 14%/19%/17% over FY26-28, albeit on a low base. We estimate a CAGR of ~15-20% in C&W/ECD/ Lloyd (each), ~10% in others (mainly driven by the solar business), and ~6-8% in switchgear and lighting segments. Its RoE is likely to improve to ~18% in FY28 vs. ~16% in FY26. The stock is trading fairly at 46x/36x FY27/28E EPS. We reiterate our Neutral rating with a TP of INR1,340, based on 40x FY28E EPS

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