Havells India dips 9% on margin disappointment in Sept quarter

In Q2, Ebitda margin declined 338 bps year-on-year to 13.8 per cent, mainly due to higher raw material costs

Shares of Havells India dipped 9 per cent to Rs 1,279 on the BSE in Thursday’s intra-day trade on profit booking after the consumer electronics company reported a weak operational performance in the July-September quarter (Q2FY22).

The company’s earnings before interest, tax, depreciation and amortisation (Ebitda) margin declined 338 bps year-on-year (YoY) to 13.8 per cent, mainly due to higher raw material costs. Net profit was down 7 per cent YoY at Rs 302 crore during the quarter.

Havells India said the contribution margins have sustained on a quarter-on-quarter (QoQ) basis though cost pressure remains significantly high. "Continued volatility in commodity prices impacted cable margins. Adequate price increase in Lloyd has been challenging due to the hyper competitive environment. Margins were further impacted by under absorption of overheads due to lower production," the company said.

However, in Q2FY22 the company posted a strong 31 per cent YoY revenue growth at Rs 3,221 crore, on the back of healthy performance from the cable, switchgear, electrical consumer durable, Lloyd and lighting segment.

“Havells India’s Q2FY22 performance was better than our estimate on all fronts. We believe a revival in the real estate sector will help drive incremental demand for consumer products like fans, lightings, air conditioners, etc. where Havells is a major player. We await management commentary on sustainability of EBITDA margin, going forward,” ICICI Securities said in a note.

Meanwhile, brokerage Motilal Oswal Financial Securities said that revenue growth of 46 per cent YoY has been the strongest in cables as expected, given the movement in copper prices. However, it added that margin has disappointed, dragging overall margin for the company and profit before interest and tax (PBIT) in the cables segment has missed expectations.

At 09:44 am, Havells India was trading 7.5 per cent lower at Rs 1,300 on the BSE, as compared to a 0.08 per cent decline in the S&P BSE Sensex. Despite today’s fall, in the past one year, the stock has rallied 82 per cent against a 50 per cent surge in the benchmark index.