Healthy margin recovery
Havells registered 13% YoY growth (predominantly volume-led), healthy in the current demand environment but lower than our expectation. The fan industry is undergoing a BEE rating change (implemented from 1 Jan 2023); hence, nonrated fans have seen pre-buying by channel partners. However, Havells has seen limited pick-up as pre-buying was more concentrated towards the economy segment (no presence of Havells). In our preview note, we mentioned that these are more channel adjustments and would not impact the endconsumer demand. Hence, despite the miss in Q3 (largely for ECD), we do not change our fan H2FY23 numbers. C&W and Lloyd saw revenue beat while switchgear & lighting was lower than expected. B-C categories have seen deceleration while B-B growth was healthy. GM has seen 72/200bps YoY/QoQ improvement to 33%. All segments have seen sequential contribution margin improvement as high-cost RM inventory was largely absorbed by Q2FY23. Lloyd too saw a contribution margin of 4% vs. a loss of 2%. EBITDA margin saw 250bps QoQ improvement (down 177bps YoY) to 10.3% (HSIE 10.4%). We maintain our EPS estimates for FY23/24/25. We value the stock on 48x P/E on Dec-24 EPS to derive a TP of INR 1,350. We maintain ADD rating.
Shares of Havells India Limited was last trading in BSE at Rs. 1152.55 as compared to the previous close of Rs. 1206.30. The total number of shares traded during the day was 92379 in over 7082 trades.
The stock hit an intraday high of Rs. 1214.60 and intraday low of 1136.40. The net turnover during the day was Rs. 107264423.00.