Havells India: Recovery on track

15 Feb 2024 , 03:13 PM

Analysts of IIFL Capital Services hosted Havells’ management at IIFL’s Investor Conference in Mumbai. HAVL remains optimistic for the upcoming summer season, anticipating healthy pickup in RAC and fans. Focus on portfolio expansion continues, with larger emphasis on C&W and ECD segments. Capacity constraints in cables restricted growth in the Industrial products segment in FY24. Despite increase in competitive pressures, HVAL is hopeful of OPM expansion with better price transmission and operating leverage in FY25. Better domestic brand positioning, US expansion, and a consistent increase in contribution margin will hasten Llyod’s turnaround. Analysts of IIFL Capital Services bake in Sales/Eps Cagr of 15/20% over FY24-26 and maintain ADD rating on the stock as FY26 P/E (46x) leaves little room for further re-rating. Their TP of 1505 is pegged at 50x on FY26 EPS. 

Llyod recovery on track: 

Management indicated aggressive investment on A&P to continue with the aim to gain market share and expect profitability in the coming quarters. Further international geographic expansion will drive volumes and improve operating efficiencies. Anticipate mid-teens market growth and 20–22% company growth, however do not expect any major jump in the RAC pricing given declining raw material prices, expect price hikes from 1Q25. 

Growth outlook intact in C&W: 

Demand for wires remains stable and expect pickup in the coming quarters with the completion of the real estate projects. Healthy demand for wires in north and east while moderately strong in regions of south and west. Further, with capacity expansion on track for cables mngt. remains confident of meeting demand, further robust demand side levers to absorb capacity additions lined up by many industry participants and does not expect material downward pressures on the margins. 

Prudent allocation of capital: 

Capex on refrigeration will be made considering sufficient volume, while focus on washing machines remains. Majority of the capex has already being incurred and expect utilisation to improve in the quarters to come.