Havells India: Q2-25 Earnings Call Highlights
Cautiously optimistic. Performance driven by festive demand. Increased cost pressure. Confident of margin normalisation. Expansion in cables & growth in emerging categories signal strong outlook
havells.com | NSE: HAVELLS
1. Key Takeaways
1.1 TLDR
Management cautiously optimistic about the future, highlighting healthy performance driven by festive demand.
Acknowledge challenges like commodity price volatility and increased costs
Confident in achieving margin normalisation over time.
Expansion plans in the cable segment and growth in emerging categories signal a positive long-term outlook.
1.2 Key Themes:
Overall Performance: Havells delivered healthy performance across categories, driven by improved consumer demand and the festive season.
B2B vs B2C Growth: B2B growth in Q2 was 9%, while B2C growth was 20%.
Volume Growth in Cables and Wires: 15% volume growth and 22% value growth.
CAPEX Guidance: Committed CAPEX for FY25 and FY26 is around ₹1,900 crores, with ₹1,000 crores expected in FY25.
Cable Segment: The cable segment saw decent growth, but margins were impacted by volatility in commodity prices. A new cable plant in Tumkur has been commissioned, with further capex planned for expansion.
Emerging Categories: Emerging categories like personal grooming, air coolers, water purifiers, and solar are showing good growth, but are still in the investment phase.
Lloyd Performance: Lloyd saw decent growth and continued to benefit from cost efficiency measures. Non-AC product categories like washing machines and refrigerators showed promising growth.
Festive Season Demand: Management is optimistic about the festive season demand, reporting a positive start to the quarter.
Employee Costs: Increased employee costs are attributed to investment in fortifying newer channels, particularly modern format retail and rural areas.
Margin Outlook: Management expects margins to normalise over subsequent quarters as commodity prices stabilise and investments in newer channels pay off.
Margins were moderated due to increased advertising spending and investments in manpower, particularly in modern format retail and rural areas. The management expects a normalization of margins in subsequent quarters.
The decline in switchgear performance, specifically in the industrial segment, was also highlighted.
1.3 Analyst Concerns:
Sustainability of demand growth, particularly in light of mixed signals from channel checks.
Impact of increased employee costs and advertising spend on margins.
Pricing pressure and competition, especially in the consumer durables segment.
Havls India Limited Q2 FY25 Earnings Call FAQ
1. How did Havells India perform in Q2 FY25?
Havells delivered a healthy performance across categories, driven by improved consumer demand and the ongoing festive season. Lloyd also experienced decent growth and continued to benefit from previously implemented cost efficiency measures. However, cable margins were impacted by significant commodity price volatility.
2. What is the outlook for the festive season?
The festive season has started positively for Havells, with both sales and spending up compared to the previous year. It is still early in the season to make definitive predictions, but the company is experiencing positive consumer sentiment.
3. What is the expected growth rate for the switchgear segment?
While the industrial switchgear business experienced a decline in Q2, the residential switchgear and sockets segment performed well. Havells expects low double-digit growth for the switchgear segment overall going forward.
4. Which emerging categories are gaining traction?
Havells is seeing good growth in personal grooming, air coolers, and water purifiers. Solar is also delivering decent growth. The company is still in the investment phase for these categories but may separate out one or two of them within the next year.
5. Will Havells India regain its industry-leading margins?
Havls remains focused on maintaining its margin leadership in its core categories. While Lloyd is still in its investment phase and cables and wires experienced fluctuations, the company expects to return to normalized margin levels soon.
6. What is the status of Lloyd’s international expansion?
Havells has begun exporting to the Middle East, while product development for the US market is underway. Further traction in international markets is expected next year.
7. What is the impact of the new cables plant in Tumkur?
The new cables plant in Tumkur will improve capacity utilization, and with an additional INR 450 crore investment, it is expected to significantly increase capacity for medium voltage underground cables within the next few years.
8. How has the price volatility in raw materials impacted the cables and wires segment?
Volatility in raw material prices, especially copper, negatively impacted cable and wire margins during Q2. The company expects margins to normalize in Q3 and Q4, assuming there is no further significant price fluctuation.
Source: Link to Earning Call Recording
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