Havells India Limited Q4 FY22 Earnings Conference Call Insights

Key highlights from Havells India Limited (HAVELLS) Q4 FY22 Earnings Concall

Management Update:

• HAVELLS said contribution margins continue to be impacted due to higher material inflation and time lag in passing on increased costs. However, the company expects gradual recovery. HAVELLS also exited the year on a momentum and remain confident on sustaining the same.

Q&A Highlights:

• Ravi Swaminathan from Spark Capital asked that if there is any further price increase that HAVELLS is likely to take across segments. Anil Gupta MD replied that to some extent HAVELLS is holding some price increases because there has been some unprecedented price increase in the last 6-8 months. HAVELLS will continue to wait for some more time to see how it behaves.

• Ravi Swaminathan from Spark Capital enquired about the growth expectation over the next 1-2 years. Anil Gupta MD answered that overall, HAVELLS is positive on growth on consumer and real estate side, as well as a lot of impetus from the government on industrial and infra as well. So overall demand should remain strong for the next 1-2 years.

• Naval Seth of Emkay Global queried about the phenomenal growth rate in Lloyd. Anil Gupta MD replied that it’s difficult to give market share figures. Lloyd’s primary sales increased at a higher level, probably a little bit higher than the industry. On margins, HAVELLS is expecting contribution margins to improve to bring back profitability once the raw material prices stabilize.

• Naval Seth of Emkay Global queried about ad spend. Anil Gupta MD replied that in the last 2 years it hasn’t normalized for the industry and for HAVELLS. Digital spends have increased. But in this coming year, especially during the season, HAVELLS do see normalized ad promotion levels coming back.

• Rahul Agarwal with InCred Capital asked about the peak revenue possible for Lloyd given the existing capacity right now. Anil Gupta MD answered that HAVELLS is manufacturing 1 million. And there is some bit of outsourcing, which the company doesn’t manufacture. So that’s not really a big constraint.

• Rahul Agarwal with InCred Capital asked about the split of other category which did a sales of INR750 crores for FY22. Anil Gupta MD replied that a large number of that is electric motors, followed by water purifiers and domestic pumps and personal grooming, as well as solar. It’s a mix of 5 product categories.

• Charanjit Singh of DSP Mutual asked about the drivers for ECD segment growth and outlook. Anil Gupta MD said that Fans came back strongly, appliances continues to be fast growth category and water heaters did well. On margins, HAVELLS expect the margins to continue to improve.

• Charanjit Singh of DSP Mutual asked about the distribution channel growth in FY23. Anil Gupta MD said it’s a continuous activity and HAVELLS is getting deeper into smaller towns. In the not so strong markets, like southern markets or western markets, HAVELLS’ presence is becoming stronger.

• Mayur Patel from IIFL Asset Management asked about the volume growth in ECD segment. Anil Gupta MD replied that it’s approximately around 15%.

• Mayur Patel from IIFL Asset Management also asked if the price hikes have dented demand in the ECD segment. Anil Gupta MD said that at the moment, the demand is healthy mainly because in these products, there was some pent-up demand because last two summer seasons were lower. But long term, if it remains, it could start affecting the demand.

• Achal Lohade from JM Financial asked if the HAVELLS has taken any price hike in 4Q and if any, in the current quarter. Anil Gupta MD said that most of the price hikes were taken during 3Q, and some amount of price hike in Switchgears and ECD in 4Q. For Lloyd, it was in end of December of about 10%.