Havells India: Amid gloomy weather, cables come to the rescue

Three of Havells’ businesses – lighting & fixtures, electrical consumer durables (ECD) and Lloyd consumer products – saw a drop in their respective revenue and Ebit (earnings before interest and tax).

ECD revenue at ₹907 crore fell 14%, the biggest drop excluding covid quarters, according to Nuvama Research. Unseasonal rains and a shorter summer season hurt demand for fans and air coolers.

Lighting revenue fell 2% as LED price deflation hurt. Lloyd revenue fell 34% to ₹1,271 crore due to a high base of growth a year earlier and a relatively weaker summer this year.

The bright spot was the cables segment, where revenue increased 27% to ₹1,933 crore and the Ebit margin expanded 130 basis points to 12.5%. The segment’s volume growth of about 20% was aided by capacity expansion and strong industrial-infra demand. The company’s Tumkur facility has started production, improving the outlook for underground cables.

Collectively, Havells’ Q1 Ebitda declined 10% to ₹515 crore. For perspective, revenue growth stood at 17% in FY25 and Ebitda was up 15%. Factoring the Q1 miss and softer urban demand, Jefferies India’s analysts cut FY26-28 estimated earnings per share by 3-4%, driven by sales cuts.

The broking firm noted that the erstwhile core product categories of Havells (switchgears, ECD, lighting) have shown weakness in one form or the other over recent quarters. Thus, Jefferies cut its target price-to-earnings multiple to 50x from 55x.

Growth levers

Havells shares trade at 57 times estimated FY26 earnings, as per Bloomberg consensus. Valuations appear expensive. Havells continues to invest across segments—doubling underground cables (over FY24-FY27), expanding the solar portfolio, and Lloyd consumer, which would eventually boost the future levers of growth, Nuvama said in a report on 21 July.

Havells’ management said the Q1 challenges are transitory, and it expects to drive revenue growth and margin improvement in the coming quarters. Further, piled up inventory is expected to normalize as demand recovers.

In short, much depends on the pace of recovery and how festive demand pans out, which in turn should determine the stock’s trajectory.