Havells India Q4 Results Review - Sustainability Of Lloyd’s Positive Margin, A Challenge: Nirmal Bang

Nirmal Bang Report

While topline was in line with our estimate, Ebitda margin was above our estimate by 158 basis points mainly due to positive margin posted by Lloyd.

Lloyd surprised on the upside with positive margins, but at the cost of topline growth. Lower incentives + Sri City plant cost stabilisation drove margins.

Benign raw material prices led to no price hikes in fans. However, recent increase in raw material prices indicate price hikes in Fans in Q1 FY25.

Cables: As new capacities by peers get commissioned in FY25, we expect pricing pressure to continue. Havells posted 18% YoY volume growth in Q4 FY24 (14.1% YoY growth) and 15% volume growth in FY24 (14.2% YoY growth). New Cables capacity is expected to be commissioned in June 2024 and meaningful contribution is expected from H2 FY25.

We maintain Accumulate with a revised target price of Rs 1,590 on SOTP basis (implied price-to-earning of 48 times on March’ 26E earnings per share). While we remain structurally positive about the long-term growth prospects, near term risks prevail, mainly in terms of sustainability of Lloyd’s positive margins and stiff competition from regional brands in Switches.

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