Havells falls 7% on UBS downgrade, valuations expensive

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26 Aug, 2025 12:21

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Moneycontrol Bureau

Shares of Havells India slipped as much as 6.95 percent intraday Thursday after brokerage UBS downgraded the stock to sell from neutral, citing rich valuations and elusive growth recovery.

The brokerage cut FY15 revenue growth guidance to around 12-14 percent from 17-20 percent earlier on weaker than expected demand recovery, after having a meeting with the company's management for getting business outlook.

The key message from the meet was a clear disconnect between growth expectations on the street and actual on-the-ground improvement, says the report.

Also read: Havells India eyes 13-13.5% EBITDA margins in FY15

The cut in FY15 revenue growth guidance implies likely growth moderation in 2HFY15 (October-March), says UBS, adding Sylvania 2H performance is also likely to be impacted by higher pension liabilities and forex volatility in Latin America.

Havells acquired lighting company Sylvania in 2007.

The brokerage feels elevated advertising spend and dealer incentives may cap EBITDA margins in next few quarters (versus around 500 basis points expansion in last 5 years), especially in light of increasing competitive intensity.

With more players foraying into the premium category, Havells ability to replicate the past margin expansion may not be easy going forward, says UBS.

The electrical equipment manufacturer's standalone core operating profit margin declined 120 basis points year-on-year to 13.2 percent during July-September quarter of FY15 while profit after tax slipped 4.9 percent Y-o-Y to Rs 119.61 crore during the quarter.

The brokerage thinks the company is moving in the right direction on its long term strategy through innovation led product portfolio expansion and targeting female centric ads to entrench its brand premium. However, with the growth differential versus peers narrowing down, UBS believes the near-term upside is capped, in the context of rich valuations.

The brokerage revised target price to Rs 295 on roll-forward to FY17E from Rs 270 earlier.

At 10:41 hours IST, the stock was quoting at Rs 291.30, down Rs 19.30, or 6.21 percent on the Bombay Stock Exchange.

Posted by Sunil Shankar Matkar