Buy Havells India; target of Rs 680: Cholamandalam Securities

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26 Aug, 2025 12:21

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Cholamandalam Securities' research report on Havells India

HIL’s standalone revenue (net of GST) grew by 48.2%YoY to INR 25.3bn aided by consolidation of Lloyds consumer durables business and strong growth across core business. In 4QFY18, Lloyds Consumer Durables reported revenue of INR 5.84bn. Revenue (net of GST) excluding Lloyd grew 14% YoY, aided by strong growth across verticals.  Revenue from Lighting & Fixtures (L&F) business grew by 20%YoY in 4QFY18 to INR 3.23bn, aided by strong growth in LED segment. L&F EBIT margin expanded by 370bps YoY to 30.9%. Switch gear segment (adj. excise) grew by 12% YoY to INR 3.95bn in 4QFY18 due to higher share of B2B and industrial segment. Switch gear EBIT Margin grew by 20bps YoY to 38.6%. Cables & Wires segment grew 13% YoY to INR 7.69bn, led by 6% YoY volume growth and 7% YoY increase in realisation. Cables & Wires EBIT margin improved by 420bps YoY to 17.1% due to better realization and shift in product mix towards high margin domestic cable business.  Electrical Consumer Durables (adj. excise) segment grew by 29% YoY to INR 4.65bn; fans (18% YoY), appliances and water heater (10% YoY) have performed well with industry leading growth and EBIT margin improved by 270bps YoY to 27.2% due to premiumisation and product mix.  Standalone Gross margin fell by 110bps YoY to 38%; EBITDA at INR 3.58bn, up 55.8% YoY; EBITDA margins improved by 69bps YoY to 14.1%; Employee cost was down 121bps YoY, ad spend were higher due to brand investment in Lloyds consumer business (+180bps YoY) and other expenses (-240bps YoY). A.PAT grew by 58.9%YoY to INR 2.32bn, adjusting for the exceptional expense of INR 90.7mn and A.PAT margin improved by 61bps YoY to 9.1%. Management has highlighted that the overall demand for AC’s in FY19 (till date) has been below expectation due to delay in summer and unseasonal rains in North India; however management is still hopeful of double digit revenue growth in FY19  Management has guided for a Capex of INR 5bn each for FY19, of which INR 3bn to set-up in house AC manufacturing facility with a capacity of 0.6mn units by the end of FY19.

Outlook

At CMP the stock trades at 38.6X & 32X FY19E & FY20E respectively. We are valuing the company 40XFY20E EPS to arrive at a target price of INR 680 (earlier: INR 665) and maintain a BUY rating on the stock

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