Havells Share Price Target Hike: Goldman Sachs Sees 10% Upside — What's Driving Growth?

Havells India's share price target gets a boost from Goldman Sachs after the research firm hiked the target to Rs 1,720 while maintaining its 'Buy' rating on the stock. The brokerage believes the company is well-positioned for a growth revival after three years of muted growth.

This positive outlook is driven by several factors, including the potential for a broader consumption revival due to GST rate cuts and the company's strategic initiatives.

The firm sees any potential weakness in the share price as an opportunity for investors to buy, anticipating that a revival in earnings growth will lead to a re-rating of the stock.

While the direct impact of GST cuts on consumer durables like air conditioners, TVs, and solar products may be limited, the brokerage expects a broader consumption revival. The second-order benefit of increased disposable income for consumers is seen as a meaningful catalyst for both consumer durables and electrical products.

After a period of an all-time low, with margins down 260 basis points compared to the average from financial year 2018 to 2022, the brokerage believes that profitability has bottomed out. As new capacities come online and demand picks up, operating leverage is expected to improve margins.

Havells is seen as a disproportionate beneficiary of these trends due to its wide portfolio of consumer electricals and durables. The company's recent underperformance over the past three years also suggests a significant potential for a multiple re-rating.

The analyst notes that Havells has experienced market share losses in key categories like premium fans, cables and wires, and switches to new entrants and competitors. Despite this, the brokerage believes that the company has effectively addressed these issues with investments.

This includes substantial investments in cable and wire capacity, which are expected to double revenue potential by the end of 2027.

Further, Havells is consistently introducing new premium products in its fans and switches categories and is focusing on newer growth areas like rooftop solar.