Brokerages Adjust Price Targets for Havells India Post-Q2 Results

Several brokerages have revised their price targets for Havells India following the company’s second-quarter earnings report for the financial year 2024-25. Despite a year-on-year increase in net profits and revenues, the company’s performance fell short of market expectations in terms of margins.

Havells India reported a 9.5 percent rise in net profit to Rs 273 crore for the quarter ending September 30, 2024, compared to Rs 249 crore in the corresponding period last year. Revenues from operations increased by 16 percent, reaching Rs 4,533 crore, up from Rs 3,891 crore in Q2 of the previous financial year. The growth was primarily driven by strong performances in the cables and wires and electrical consumer durables segments.

Nuvama Institutional Equities, a domestic brokerage, noted, “However, margins suffered from commodity price volatility and ahead-of-schedule advertising and promotional spending.” This led to a decline in contribution margins by 200 basis points to 20.7 percent and a dip in EBIT margin by 300 basis points year-on-year to 9.9 percent.

Japanese brokerage Nomura maintained a ‘neutral’ rating for the consumer goods company, emphasizing that current valuations seem to include expected recoveries. Nomura projects that Havells India can sustain its 16 percent revenue growth rate until the fiscal year 2026-27, largely due to its efforts in premiumizing electrical consumer durables (ECD) and new capacity development in the wires and cables segment. However, it cautioned that delayed price adjustments and sluggish demand could impede margin improvement.

Meanwhile, Jefferies commented that the margin shortfall overshadowed the commendable sales growth, prompting it to reduce the target price from Rs 1,880 to Rs 1,870. Investec also decreased its target price from Rs 1,910 to Rs 1,850 due to margin concerns, adjusting its earnings per share estimates downward by 3-5 percent for FY25-27.

Despite the challenges, the start of the festive season brought some optimism, with positive initial sales feedback reported. Following the earnings release, Havells India’s shares fell by 5.84 percent, settling at Rs 1,826.35 on the Bombay Stock Exchange.