Havells India Ltd., an Indian multinational electrical equipment company, in its Q3 earnings call highlighted a strategic transformation across multiple business segments, with challenges in switchgear margins and ongoing price erosion in lighting. The company mentioned that it’s aggressively expanding into new sales channels like modern format retail and quick commerce, focusing on market share gains in consumer-facing categories. Lloyd brand remains a key growth focus, with plans to enter refrigerator and washing machine markets through backward integration and differentiated product offerings. Management remains cautiously optimistic about consumer demand, expecting margin normalization in Electrical Consumer Durables (ECD) and switchgear segments, targeting 12-14% EBIT margins by FY26.
Havells reported mixed performance for 3Q, with the company’s consolidated net profit declining by 3% year-over-year, while revenue from operations increased by 10.76% and the company’s performance was highlighted by healthy performance in consumer, industrial, and infrastructure segments, despite wire growth challenges. The company declared a 400% interim dividend and announced a INR480 crore investment in a new Rajasthan refrigerator manufacturing facility, targeting 14 lakh units capacity by Q2FY27. Despite margin pressures, the company expressed optimism about improved demand and margin scenarios in upcoming quarters.
Continue Reading: Discover the Vital Insights from Havells India Ltd.’s Earnings Call!
Financial/Operational Metrics:
- Revenue: INR4,889 crore, up 11% YoY.
- Net Profit: INR278 crore, down 3% YoY.
- Diluted EPS: INR4.44, down 3% YoY.
- Operating Profit: INR426 crore, down 2% YoY.
- Employee Benefits Expense: INR464.11 crores, up 22% YoY.
- Ad and Sales Promotion Expenses: INR177.66 crores, up 1% YoY.
Analyst Crossfire:
- Switchgear Margins & Plant Relocation, B2C Margins & Rural Demand (Ravi Swaminathan – Spark Capital, Chaitanya – Paterson)? Margins in the switchgear segment declined due to lower-margin project business and plant relocation. The contribution margin is expected to normalize at 38-40% in the coming quarters. Product mix changes have impacted B2C margins, but improved consumer demand should support better margins in the near term. Rural demand is not a significant factor for Havells (Anil Rai Gupta – CMD, Rajiv Goel – ED).
- Lighting Business Trends, Quick Commerce in Wires & Cables (Natasha Jain – PhillipCapital)? Volume growth in lighting was 13-14%, but price erosion continues to impact revenues. Pricing pressures in premium chip-on-board (COB) technology were noted, though deflation is expected to bottom out soon. Destocking in the wire segment is reversing, with rising copper prices expected to drive restocking in Q4. Seasonal demand for underground cables should boost momentum (Anil Rai Gupta – CMD; Rajiv Goel – ED).
- Domestic Appliances & ECD Margins, Consumer Demand & Summer Outlook (Sonali Salgaonkar – Jefferies): Growth in water heaters and domestic appliances improved segment performance, but contribution margins declined due to lower profitability in appliances compared to fans and water heaters. Consumer sentiment improved towards the end of the quarter, with positive channel sentiment for the upcoming summer season (Anil Rai Gupta – CMD).
- Lloyd’s Profitability & Backward Integration, Industrial Demand Resilience (Renu – IIFL Securities): Lloyd’s AC margins are expanding due to premiumization, though profitability in non-AC categories remains under pressure. Investments in a refrigerator manufacturing facility will help profitability in the long term. While consumer demand showed weakness, industrial and infrastructure demand remains strong, offsetting broader market challenges (Anil Rai Gupta – CMD).
- Future Margin Targets, Employee Costs & Market Share (Kunal Sheth – B&K Securities, Praveen Sahay – PL Capital): Havells targets 12-13% EBITDA margins, ex-Lloyd, by FY26 as segment contributions normalize. Investments in employee expansion for consumer-facing channels have led to market share gains across categories. These costs are expected to normalize over time (Anil Rai Gupta – CMD; Rajiv Goel – ED).
- Switchgear Margins & Project Business, Cables & Wires Growth (Charanjit – DSP Mutual Funds, Achal Lohade – Nuvama): Switchgear margins declined due to a higher proportion of lower-margin project business and plant relocation. Margins are expected to stabilize at 23-24%. Volume growth in cables was 11-12%, while wires saw a slight decline due to destocking. New capacity at the Tumkur plant will enhance growth potential (Rajiv Goel – ED).
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