Havells India - Core Remains Healthy; Focus On Competitiveness: HDFC Securities

HDFC Securities Institutional Equities

We interacted with the management of Havells India Ltd. and remained confident in healthy growth for its core categories along with improving margin print. Sustained investments (manufacturing, distribution, marketing, etc.) are maintaining their market competitiveness across categories. Business-to-consumer demand is slow but business-to-business is largely compensating.

A weak summer season will have its bearing on Lloyd and the fan business in the near term. Non-rated fan inventory should largely be liquidated by Q1 FY24 (the weak season delayed it by one quarter); however, we believe fan performance will be healthy for the rest of FY24 (also supported by a price hike of ~5%).

The real estate tailwind will continue to support the demand for its core portfolio (switchgear, cables, and lighting).

Lloyd is now among the top three players in the room AC segment, and despite the weak summer, it is gaining market share. However, the drag on profitability will remain, given the investments in branding, distribution, and manufacturing.

We believe the margin has hit a trough and will continue to improve from here on, given softening commodity inflation; an increase in the premium mix (fans: 30% versus 17% five years back) and lowering losses in Lloyd.

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