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Havells India Ltd>
  • CMP : 1,889.9 Chg : 35.70 (1.93%)
  • Target : 1,420.0 (23.05%)
  • Target Period : 12-18 Month

21 Jan 2023

Cables & Lloyd segment drive revenue…

About The Stock

About the stock: Havells India (HIL) is India’s leading electrical appliances & equipment manufacturer with a diversified product portfolio consisting of switchgears, cables, electrical consumer durables and lighting & fixtures. Apart from ‘Havells’, HIL’s other major brands include Crabtree, Standard, Reo and Lloyd.

  • In all its business segments, Havells has a strong presence in the organised product category with market share ranging between 6% and 20%
  • Robust balance sheet with RoE & RoCE of 19% & 24%, respectively (five-year average), with stringent working capital policy
Q3FY23 Results

Strong revenue growth; sequential improvement in margins.

  • Revenue up ~13% YoY to ₹ 4119.7 crore majorly led by ~30% revenue growth in Lloyd and ~17% revenue growth in cables segment.
  • Gross margin increased by 72 bps YoY (+ 212 bps QoQ) to 33% supported by lower raw material cost and subsiding inventory losses. EBITDA margin witnessed sequential recovery by 246 bps (down 177 bps YoY) to 10.3%
  • PAT increased by ~52% QoQ to ~₹ 283.9 crore (down ~7% YoY), tracking EBITDA margin recovery
What should Investors do?

Strong B2C brand, focus on market share gains of Lloyd through improved product mix and dealer addition. The company’s share price has grown ~2.1x in the last five years.

  • We maintain our BUY rating on the stock
Target Price and Valuation

We rollover our valuation on FY25E. We value the stock at 48x FY25E EPS with a revised target price of ₹ 1420/share.

Key Triggers for future price performance
  • Total ~1.7 crore new houses under PMAY, urbanisation and rising aspiration level will give a significant boost to demand for home appliances
  • Revival in the Lloyd business through new launches and improvement in segment margin
  • It aims to increase its town penetration from current 1150 to 2000 and retail touch points from 1.6 lakh to 2.5 lakh over the next five years
  • Model revenue, earnings CAGR of ~16% & 19%, respectively, in FY22-24E
Alternate Stock Idea

We like Supreme Industries in our coverage.

  • Supreme is market leader in the plastic piping segment with ~15% market share. Robust b/s with average RoE, RoCE of 24%, 27%, respectively
  • BUY with a target price of ₹ 2600

Key Financial Summary

(| Crore) FY20 FY21 FY22 5 Year CAGR (FY17-22) FY23E FY24E FY25E 3 Yr CAGR (22-25E)
Net Sales 9,429.2 10,427.9 13,888.5 0.2 16,898.3 18,735.5 20,950.0 0.1
EBITDA 1,027.4 1,565.2 1,757.6 0.2 1,700.3 2,388.9 2,693.1 0.2
EBITDA Margin (%) 10.9 15.0 12.7 - 10.1 12.8 12.9 -
PAT 733.0 1,039.6 1,194.7 0.2 1,140.6 1,636.8 1,853.1 0.2
EPS (|) 11.7 16.7 19.1 - 18.2 26.1 29.6 -
P/E (x) 98.2 69.3 60.5 - 63.4 44.2 39.0 -
Price/Book Value (x) 16.7 13.9 12.1 - 12.6 11.2 10.4 -
Mcap/Sales 7.7 6.9 5.2 - 4.3 3.9 3.4 -
RoE (%) 17.0 20.1 20.0 - 19.9 25.3 26.5 -
RoCE (%) 19.6 24.9 23.7 - 23.6 30.2 32.0 -
Source: Company, ICICI Direct Research

Key takeaways of results & conference call highlight

Q3FY23 Results: Growth in topline, margin recovery in progress…

  • Havells’ topline growth came in at ~13% YoY to | 4119.7 crore, led by B2B segment (cable & wire segment). The B2C segment volume offtake was impacted by higher inflation and unfavourable base   
  • Segment-wise revenues for Q3FY23 were as follows; Cables & wire segment revenues were up by 17.1% YoY to | 1412.1 led by ~20% volume growth. Further, continuous focus on market share gains helped drive Lloyd segment revenues up by ~30% YoY to ~| 607 crore. However B2C segment impacted by lower demand amid unfavourable base and high inflation. The Electrical consumer durable (ECD), switchgear and lighting revenues were up by 4.7%, 3.7% and 3% YoY to | 934.8 crore, | 514.1 crore and | 420.1 crore respectively.
  • ECD grew, albeit a slow pace, mainly due to slower offtake of fans and moderating consumer demand. The company is witnessing stocking of low value fans and destocking of premium fans by dealers
  • On a three-year CAGR basis, Lloyd and cable segment revenues increased by 26% each, switchgear revenue increased by 16%, Lighting & ECD revenues increased by 15% and 20% respectively.
  • Havells’ EBITDA margin at 10.3% up 246 bps sequentially led by easing raw material costs. However, lower operating leverage and increased advertisement expenditure led to EBTIDA margin decline of ~177 bps YoY
  • Net profit declined by ~7.2% YoY to | 283.9 crore. However, PAT grew ~52% sequentially on account of recovery in margins


Q3FY23 Earnings Conference Call highlights

Future Demand Outlook:

  • According to the management, the company is witnessing a moderating consumer demand on account of higher inflation
  • Demand from B2B segment continues to be robust and there are not any one-offs in this business
  • Demand for RACs was subdued in Q3FY23 as seasonal demand is usually low during the quarter. Demand for RACs is expected to grow from late January onwards at the onset of summer season
  • Havells’ channel partners are stocking up the inventory of cables, wires and RACs. 
  • As per the management, transition to BEE norms has resulted in de-stocking of premium fans and high stocking of lower priced fans. The company plans to take price hike of ~3-4% in Q4FY23 as a result of transition to new BEE norms.


  • The company’s margins improved sequentially as a result of liquidation of high-cost inventory. However, Lloyd business continues to hold high-cost inventory
  • Higher stocking and price hikes in cables and wires segment led to expansion in margins of the company
  • The management expects further improvement in margins, however recent volatility in raw material prices might restrict the expansion in upcoming quarters
  • According to the management, inventory in the system is not very high currently


  • The management expects EBIT level recovery of Lloyd from Q4 onwards with subsiding high cost inventory
  • As a result of transition to BEE norms, there will be a change in energy ratings of RACs. Due to the same, Havells will be taking a 3-4% price increase in RACs in Q4FY23
  • RACs contribute ~75% to Lloyd’s revenue
  • The company’s upcoming facility in Sri City, Andhra Pradesh for production of RACs and refrigerators is expected to start functioning from March


  • The management reiterated that it will be spending | 700 crore for capex in FY23.



I/We, Sanjay Manyal, MBA (Finance), Hitesh Taunk, MBA (Finance) and Ashwi Bhansali, MBA Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. It is also confirmed that above mentioned Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months and do not serve as an officer, director or employee of the companies mentioned in the report.

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