Havells India growth stays healthy as advertising spend delays margin recovery

Investment View and Target Price

In its July 19, 2026 result update on Havells India, Anand Rathi Research maintained its BUY rating but reduced the 12-month target price to Rs 1,379 from Rs 1,447. The broker retains a positive long-term view, supported by healthy revenue growth, capacity additions and the expanding Renewables opportunity. However, it expects earnings recovery to be gradual after weak Q1FY27 profitability.

Key monitorables are the pace of Lloyd margin recovery, raw-material price stability, execution of planned capacity additions and the scaling up of the Renewables business.

Q1FY27 Financial Performance

Havells India reported consolidated Q1FY27 revenue of Rs 65,182 million, up 19.5 per cent year on year, led by 27 per cent growth in Cables & Wires. Renewables revenue was Rs 3,143 million, up 235.9 per cent year on year, and was reported as a separate segment from Q1FY27.

Switchgear revenue was affected by West Asia-related export disruptions and raw-material price volatility. Profitability weakened materially during the quarter: EBITDA declined 9.6 per cent year on year to Rs 4,662 million, while EBITDA margin contracted 230 basis points to 7.2 per cent. Gross margin fell 214 basis points. Advertising and promotion spending more than doubled year on year, employee cost rose 6.4 per cent and other expenses increased 28.8 per cent.

PAT declined 16.5 per cent year on year to Rs 2,904 million, with PAT margin at 4.5 per cent. Havells implemented price increases of 5-20 per cent across categories. Electrical Consumer Durables price increases averaged about 7-8 per cent and were stated to have been well absorbed by consumers.

Management Outlook and Business Trends

Management expects advertising spending to normalise from Q2FY27 and margins to improve as recent price actions take effect. It reported healthy secondary sales, no meaningful market-share loss and improving distribution quality as the company shifts to a sell-out-focused distribution model.

Cables & Wires volume growth was flattish because volatile copper prices disrupted dealer stocking, although management saw no demand-related concern. About Rs 8 billion of the Rs 14 billion FY27 capex guidance is earmarked for cable capacity expansion, including specialised solar cables.

Lloyd and Switchgear

Lloyd's Q1FY27 air-conditioner volumes grew in single digits as a delayed summer, previous GST-related channel stocking and distribution normalisation affected primary sales. Lloyd reported an EBIT margin loss of 3.9 per cent, but management expects its contribution margin to return to double-digit levels as commodity volatility subsides and pricing benefits flow through.

Management expects Switchgear exports and overall segment growth to recover from Q2FY27 as shipping disruptions ease. About 15 per cent of Switchgear revenue comes from international markets.

Renewables Opportunity

Renewables benefited from solar-panel demand and Havells' strategic investment in Goldi Solar, although profitability was constrained by a higher mix of lower-margin panels versus inverters. Management intends to expand into higher-margin consumer, commercial and industrial solutions, battery energy storage systems, electric vehicle chargers and distributed renewable solutions.

Earnings Estimates and Valuation

Anand Rathi reduced FY27E/FY28E EBITDA estimates by 3.9 per cent/2.9 per cent and PAT estimates by 6.0 per cent/4.9 per cent, while revenue estimates were broadly unchanged. The broker forecasts revenue and PAT compound annual growth rates of 13 per cent and 8 per cent, respectively, over FY26-FY28E.

Key Risks

• Commodity-price volatility.
• Lower volumes in consumer-facing segments.
• Higher competitive intensity.