Havells India regains Rs 50,000 crore m-cap mark as stock hits record high

The company reported a strong 80 per cent YoY growth in its standalone net profit at Rs 325 crore in September quarter

Havells India has regained the Rs 50,000-crore market valuation, after the consumer electronics company's stock rallied 6 per cent to hit a record high of Rs 827.65 on the BSE on Tuesday. The stock has surpassed its previous high of Rs 806.90, touched on June 28, 2019.

At 11:18 am; Havells India was trading 5 per cent higher at Rs 821.55 with its market capitalisation (market-cap) at Rs 51,430 crore on the BSE, exchange data shows. In comparison, the S&P BSE Sensex was up 1 per cent at 40,146 points.

The stock was up for the third straight trading day, soaring 14 per cent after the company reported a strong 80 per cent year-on-year (YoY) growth in its standalone net profit at Rs 325 crore in September quarter (Q2FY21). Net revenue grew 10 per cent YoY at Rs 2,452 crore.

Ebitda (earnings before interest, taxes, depreciation, and amortisation) jumped 79 per cent YoY at Rs 421 crore, due to lower advertisement and sales promotion and other expenses. Ebitda margins improved 670 basis points at 17.2 per cent from 10.5 per cent in previous year quarter.

The company said the effective price and cost management enabled contribution margin improvements, especially in ECD and Lighting. The lower advertisement and SG&A costs have further supported EBIT margins, it said.

Havells India’s Q2FY21 results were significantly better than expected on strong demand recovery from consumer and residential portfolios, while 56 per cent growth in Lloyd was major positive. Although margins surprised positively, analysts at Emkay Global Financial Services believe that it is not sustainable as inventory adjustments are non-recurring in nature and A&P spends will bounce back with the revenue recovery. A&P spends for FY21 is expected to decline 41 per cent and we bake in reversal in FY22 with a 60 per cent increase (2.9 per cent of Sales), it said.

Benefits of low rentals and other cost optimization will be visible on a sustainable basis. Lower channel inventory, demand recovery during the festive season, recovery in Real Estate and benefits of market share gains will augur well for sustained revenue growth.

“Our estimates factor in strong revenue recovery from H2FY21. Havells’ strong balance sheet, distribution network strength of its core business and revival in market share for Lloyds in RAC can help deliver better-than-industry growth with a macro recovery,” the brokerage firm said in result update.