Havells india reported a strong Q1 revenue of Rs 48.3 billion, showing a robust y-o-y growth of 14%, which surpassed our and Bloomberg consensus estimates by approximately 2-3%. However, the Ebitda margin was disappointing at 8.3%, falling short of both Nomura’s and consensus expectations at 10.8% and 10.1% respectively. As a result, the Ebitda for the quarter reached Rs 4 billion, with a y-o-y increase of 11%, but it was 21% below our estimates and 15% below the consensus estimates. The underperformance was mainly attributed to the performance of Lloyd. This negative outcome could have implications for Voltas as well.
The Q1 results showed remarkable performance in the cables & wires (C&W) segment, achieving a surprising y-o-y growth of 24%, and Lloyd also performed with a growth rate of 20% compared to last year. However, this growth was partially offset by modest 5-9% y-o-y growth in the switchgear and electrical consumer durable (ECD) segments. The key disappointment in terms of Ebit was seen in Lloyd segment, which reported a margin of -4.7%. Other segments also experienced lower margins: ECD at 10.9%, Lighting at 14.4%, and C&W at 11.4%.
Nevertheless, Havells aims to maintain its margin guidance of 13-15%, relying on factors like reduced commodity benefits and improved operating leverage. Regarding Lloyd, there are opportunities for margin improvement. This can be achieved through increased scale by white labelling for exports and optimising logistics costs from the South plant. We anticipate robust growth in the infra segment, which will lead to increased demand in the C&W segment for HAVL. As a result, we have revised our growth projections to 16% and 12% for FY24 and FY25.