Tough to justify Havells' valuation

FY18 margins might be checked due to acquisition of Lloyd and competitive pressure

Havells, the electrical equipment major, might be a classic case of a mid-cap stock being re-rated much ahead of an improvement in its fundamentals.

While its stock continued to react positively (up two per cent on Wednesday) to a decent set of March quarter (Q4) results, the 50 per cent year-to-date gain might limit a significant upside from here, as Havells now trades at 40 times its estimated FY18 earnings.

And, sustaining the profitability could be a challenge. Even if recovery after demonetisation gradually plays out, the consolidation of Lloyd's recently acquired consumer business could dilute the earnings margin.

In