ICICI Securities has reaffirmed its Buy rating on Havells India, with a revised target price of Rs 2,120—reflecting a 17% upside from the current market price. The report highlights robust performance in the business-to-consumer (B2C) segment, driving revenue growth, despite margin pressure due to higher operational costs and advertising expenses. The key catalysts for future growth include strong demand in consumer durables, recovery in margins expected in the second half of FY25, and ongoing capital expenditure. This article unpacks the financial performance and growth prospects for investors eyeing Havells for long-term gains.

Current Stock Levels and Target Price

Havells India is currently trading at Rs 1,806, with ICICI Securities setting a 12-month target price of Rs 2,120, representing a 17% potential upside. The company’s recent financial results and strategic investments make it a favorable pick for investors looking to benefit from the growth of India's white goods and consumer durables market.

Key Metrics:

Current Price: Rs 1,806
Target Price: Rs 2,120
P/E (FY25E): 72.1x
Market Cap: Rs 1,132 billion

Q2FY25 Results: Revenue Growth Amid Margin Pressure

1. Revenue Growth Driven by B2C Segment

Havells reported a 16.4% year-over-year (YoY) increase in revenue for Q2FY25, reaching Rs 45,393 million. This was driven primarily by strong performance in the cables and wires and electrical consumer durables (ECD) segments, which grew by 22.8% and 16.8% YoY, respectively. The Lloyd Consumer business also performed well, registering 18.5% YoY growth.

Switchgear Segment: Though the switchgear segment saw only 3.3% YoY growth, the residential switchgear business performed better than the industrial segment, which faced challenges due to slower infrastructure activity.
2. Margin Compression from Higher Costs
Despite revenue growth, EBITDA margins contracted to 8.3% (down from 9.6% YoY), driven by increased ad spending and higher operational expenses. Havells has been investing heavily in advertising, with ad spend as a percentage of sales rising to 2.9%, compared to the company’s four-year average of 2.5%.

Impact on Profitability: The net profit grew modestly by 7.7% YoY, reaching Rs 2,683 million, even though high input costs, particularly in cables and wires, weighed on margins.

Segmental Performance: Cables, Consumer Durables, and Lloyd Drive Growth

1. Cables and Wires Lead Revenue Growth

The cables and wires segment continued to deliver strong results with 22.8% YoY revenue growth. The segment benefitted from 15% volume growth driven by restocking activities from trade channels. However, high-priced inventory from earlier quarters put pressure on margins, which are expected to normalize in the second half of FY25.

2. Electrical Consumer Durables (ECD) Performance

The ECD segment saw 16.8% YoY growth, propelled by strong demand for fans, water heaters, and kitchen appliances. The festive season also contributed to demand uptick in this segment, and the growth trajectory is expected to continue in the coming quarters.

3. Lloyd Consumer’s Mixed Performance

The Lloyd Consumer segment, which includes refrigerators, washing machines, and LED panels, posted 18.5% YoY revenue growth. However, losses at the EBIT level continued, largely due to underperformance in the RAC (Room Air Conditioner) segment. Nevertheless, Lloyd’s margins are expected to recover, supported by cost-saving initiatives and operating leverage.

Capex Plans: Aggressive Investments for Future Growth

4. Expansion via Capex Investments

Havells plans to invest Rs 19 billion over FY25–26 to drive growth. The company has already spent Rs 3.2 billion in the first half of FY25. The capex is targeted at expanding capacity, especially in the Tumkur cables plant, which is currently operating at 85%–90% utilization. This increased spending highlights Havells’ commitment to meeting future demand in key growth areas such as consumer durables and cables.

Margin Recovery and Business Outlook

5. Margin Recovery Expected in H2FY25

Havells anticipates a recovery in EBITDA margins in the second half of FY25, as the impact of higher ad spending and input costs normalizes. Furthermore, the margins in the cables and wires segment, which were affected by high-priced inventory, are expected to improve, aided by more stable commodity prices.

6. Strong B2C Growth and Improving Rural Demand

Havells continues to see strong growth in its B2C segment, which expanded by 20% YoY in Q2FY25. The company also reported that rural demand is beginning to pick up, contributing to a balanced revenue distribution between urban and rural markets.

Investment Outlook: A Strong Long-Term Bet

ICICI Securities projects a 15.4% CAGR in revenue and a 22.7% CAGR in profit over FY24–27 for Havells, underpinned by robust performance in key segments, capex investments, and margin recovery. The company's return on capital employed (RoCE) is expected to improve from 15.1% in FY24 to 19% in FY27.

With a discounted cash flow (DCF)-based target price of Rs 2,120, ICICI Securities maintains its Buy rating on Havells. The stock currently trades at 72.1x FY25E earnings, offering long-term growth potential as India’s consumer durables market expands.

Conclusion: A Promising Buy for Investors

Havells India's combination of strong revenue growth, strategic capex investments, and expected margin recovery makes it a promising stock for long-term investors. The company’s leadership in the white goods and consumer durables sector, along with improving rural demand and B2C expansion, supports its continued upward trajectory. With a target price of Rs 2,120, investors could see substantial returns in the next 12 months.

Disclaimer: Investors are advised to conduct thorough due diligence and consult with financial advisors before making investment decisions. Stock market investments carry inherent risks, and past performance is not always indicative of future results.