Havells slides 5% on cautious demand outlook; here are key Q4 takeaways

Havells' management highlighted that consumer sentiment remains subdued due to persistent inflation

The stock of Havells India, the country’s largest listed consumer electrical and durables company, was down 3 per cent on Wednesday in a bullish market. Though the company delivered on revenue and operating profit in Q4FY25, the stock was the biggest loser on the BSE 100. 

The negative sentiment was due to the company management’s cautious commentary on the outlook for cooling products. Some brokerages have cut their earnings estimates and others slightly increased it. 

The company’s performance in Q4 was robust but some product segments were weak. Revenue improved 20 per cent in Q4 year-on-year (Y-o-Y), aided by a 21.2 per cent growth in cable and wire business and a 39.5 per cent jump for Lloyd, the home appliances and electronics brand of the company, on a low base. Consumer durables, switchgear and lighting segments disappointed, delivering 9.4 per cent, 6.2 per cent and 0.5 per cent growth, respectively. 

Gross margins fell by 70 basis points (bps) Y-o-Y and were offset by lower expenses on employees and advertising. Margins and higher operating leverage helped the company post 20 per cent growth in operating profit while maintaining operating profit margins at 11.6 per cent. 

Havells India said consumer sentiment was muted amid higher inflation. Lloyd had healthy sales and segment margins expanded 350 bps to 6.2 per cent, but demand for room air conditioners weakened in March and April when it was a relatively mild summer, especially in South India. Sales could be weak in the June quarter but the company is hopeful that Lloyd will improve market share and profits. 

The switchgears segment grew 6 per cent Y-o-Y and 20 per cent sequentially: residential switchgear business comprised 75 per cent of segment sales and the rest came from industrial switchgears. The residential segment grew on the back of product portfolio expansion, project business and market share gains in Tier-II and Tier-III cities. Though the segment’s revenue contribution margins declined by 230 bps in Q4 FY25 to 37.9 per cent, the company expects it to improve to 38-40 per cent. 

Nuvama Research analysts led by Achal Lohade have raised their FY26-27 earnings estimates for Havells India by 4-5 per cent, citing improved margins for switchgears and Lloyd. The brokerage expects recent government measures like tax breaks, and a favourable liquidity scenario, to help revive consumer demand. 

Demand outlook for the wires and cables business remains strong; the company is gaining market share in Tier-II and Tier-III cities and a new factory in Tumakuru is starting to contribute to business. Nomura Research, however, has cut its price to earnings ratio from 50 times to 48 times, citing rising competition. Despite the cut, Siddhartha Bera and Kapil Singh of the brokerage believe that the valuation premium of the stock will sustain around the midpoint of the historical trading band of 40-60 times. Their forecast is based on the diversified business mix of Havells and strong 26 per cent earnings per share growth over FY25-27. 

Given the near-term outlook and expensive valuations, Kotak Research has cut its FY2026-27 earnings estimates by 3-4 per cent and has revised its fair value to ₹1,400. It has also tweaked revenues, factoring in the subdued outlook for cooling products in Q1, and cut margin estimates by 20-30 basis points.