Havells India slips 6% on weak operational performance in December quarter

In Q3, standalone ebitda margin contracted 390 bps to 12.1 per cent due to elevated commodity costs and partial transition in pricing especially in consumer durables.

Shares of Havells India dipped 6 per cent to Rs 1,232.15 on the BSE in Friday’s intra-day trade after the company reported weak operational performance in the December quarter (Q3FY22).

The company’s standalone earnings before interest, taxes, depreciation, and amortization (ebitda) margin contracted 390 bps to 12.1 per cent in the reporting qaurter due to elevated commodity costs and partial transition in pricing especially in consumer durables. Its net profit declined 12 per cent to Rs 306 crores from Rs 349 crores in the same quarter a year ago. 

Net revenue during the quarter grew 15 per cent to Rs 3,652 crore from Rs 3,166 crore a year ago. The company said the festive demand was encouraging, however it tapered in the latter part of the quarter, owing to high inflation and omicron scare.

According to brokerage ICICI Securities, Havells’ topline growth of 15 per cent in Q3FY22 (two year CAGR of 27 per cent) is encouraging. The brokerage believes this would be largely driven by volume growth ahead, while delay in price hikes and restoration of advertisement expenditure dragged the overall EBITDA margin in Q3.

“We believe, industry wide price hikes (to the tune of 15%) would help recovery in the EBITDA margin going forward and revival in the real estate sector will be the catalyst for growth. We await management commentary on likely impact of price hikes on near term demand,” it said in a note.

Havells India has underperformed the market in recent past. In six months, the stock has gained 12 per cent, as against a 13 per cent rise in the S&P BSE Sensex.  In the last one year, it was up 9 per cent, as compared to a 19 per cent rally in the benchmark index.