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Centrum Broking
Target: ₹1,875
CMP: ₹1,768.45
Havells India’s sales growth was healthy at 20 per cent y-o-y to ₹5,800 crore, 3 per cent above our estimate, largely driven by Lloyd (+47 per cent y-o-y) and ECD (+20 per cent y-o-y led by fans and air-coolers) amid strong summer season. Gross margin rose 150 bps y-o-y 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 y-o-y to ₹170 crore) at 3 per cent of sales while staff costs rose 27 per cent y-o-y to ₹460 crore (at 7.9 per cent of sales, up 40bps y-o-y). EBITDA grew 43 per cent y-o-y to ₹580 crore leading to 160 bps y-o-y expansion in margin to 9.9 per cent, below our estimate of 11.1 per cent. PAT grew 43 per cent y-o-y 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
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