Centrum Broking
Target: ₹1,875
CMP: ₹1,768.45
Havells India‘s sales growth was healthy at 20 per cent yoy to ₹5,800 crore, 3 per cent above our estimate, largely driven by Lloyd (+47 per cent yoy) and ECD (+20 per cent yoy led by fans and air-coolers) amid strong summer season. Gross margin rose 150 bps yoy to 31.9 per cent, but was lower than past three quarters by 100-140bps due to cost inflation and sales mix.
Ad-spends were higher (+28 per cent yoy to ₹170 crore) at 3 per cent of sales while staff costs rose 27 per cent yoy to ₹460 crore (at 7.9 per cent of sales, up 40bps yoy). EBITDA grew 43 per cent yoy to ₹580 crore leading to 160 bps yoy expansion in margin to 9.9 per cent, below our estimate of 11.1 per cent. PAT grew 43 per cent yoy to ₹410 crore, below our/consensus estimate of ₹440 crore each due to operating margin miss.
As per management, consumer spending is showing signs of improvement, though it is premature to determine if demand will continue to strengthen. Following rising commodity prices, Havells undertook price hikes in majority of categories in Q1, however, it will partly be reflected in Q2. We increase our FY25E/26E EPS estimates by 4/7 per cent and retain the “Add” rating on the stock with a revised target price of ₹1,875 based on 50x FY26 EPS.