Buy Havells; target of Rs 2120: ICICI Securities

ICICI Securities research report on Havells

Havells reported strong performance in B2C segment with 20% revenue growth YoY. Broad-based growth across segments led to strong revenues but higher operational costs weighed on margins. Takeaways: (1) Higher consumer demand led to strong double digit revenue growth in key segments of ECD, cables and Lloyd. Weakness in industrial switchgear business impacted overall segmental growth (+3.3% YoY). (2) Higher ad spends (due to the festive season) and staff cost weighed on EBITDA margin. With normalisation in these costs, EBITDA margin may recover in H2FY25E. (3) Lloyd’s segmental growth (+18.5% YoY) was driven by non-RAC businesses. (4) Capex intensity may continue as the company aims to spend INR 19bn over the next two years. We cut FY25/26E earnings by 5.6%/3.1% to factor in Q2FY25 result.

Outlook

At our DCF-based revised TP of INR 2,120, the stock trades at 68x FY26E EPS and 56x FY27E EPS. We remain positive on Havells led by its diversified business model, established brands and sub-segmentation strategy. Maintain BUY.