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Havells India Ltd shares fell about 6% on Friday, dropping to a new 52-week low of ₹1,002.80 apiece, even as the company reported solid revenue growth in the September quarter (Q2FY27). Rising competition in the cables and wires segment, continued losses in the Lloyd Consumer business and inflationary pressures are key concerns for investors. Many analysts cut their earnings estimates for FY27 and FY28 after the Q2 results. For instance, Motilal Oswal Financial Services has lowered its Ebitda estimates by about 5% and 8% for FY27 and FY28, respectively, citing continued margin pressure and higher losses in the Lloyd business. Havells’ consolidated revenue rose 34.6% year-on-year to ₹6,432 crore in Q2FY27. However, Ebitda increased at a relatively slower pace of 30.8% to ₹573 crore, with margin contracting to 8.9% from 9.2% a year ago. Ebitda performance was affected by subdued contribution margins, particularly in cables, offsetting some of the benefit from stronger revenue growth. Ebitda stands for earnings before interest, tax, depreciation and amortization. Advertising and sales promotion expenses provided some relief, growing just 4.4% to ₹137.6 crore. However, a sharp drop in other income meant pre-tax earnings grew at a slower pace than Ebitda, rising 15.3% to ₹472.6 crore. Cables under pressure Havells’ cables business remains its biggest margin concern. Commodity-linked price increases and a shift in the mix towards larger-sized cables helped the segment’s revenue surge nearly 48% year-on-year to ₹2,999 crore. But Ebit margin contracted by 357 basis points (bps) to 10.15%, hurt by a fall in aluminium prices. Havells’ management indicated that further price increases could follow if raw-material pressures persist. The company has retained its FY27 capital expenditure plan of ₹1,400 crore, primarily for cables, wires and research and development. Havells’ lighting revenue grew 7% to ₹459 crore, but its Ebit margin fell by 283 bps to 9.91% because of certain project orders. Meanwhile, switchgear revenue increased 31% to ₹782 crore, and its Ebit margin expanded by 309 bps to 25.4%. The renewables business continued to scale up faster, with revenue increasing a whopping 148% to ₹329 crore. Lloyd remains a drag Lloyd’s profitability remains a drag, with the segment reporting an Ebit loss of ₹105 crore, similar to the year-earlier period but significantly higher than the ₹56 crore loss recorded in Q1FY27. Lloyd’s revenue, however, rose 28.5% to ₹619 crore, aided by a combination of volume growth and price hikes. “Continued raw material cost inflation and delayed price pass-through remain key monitorables for margin recovery,” said Motilal Oswal. Havells took calibrated price hikes, which helped offset some of the raw-material inflation. While commodity inflation has aided the revenue outlook, cost pressures remain a sore spot for Havells. Further, Ultravolt’s progress in the cables and wires business needs closer monitoring. “We lower our target price-to-earnings ratio to 35x (from 38x) – which is near the low end of its historical trading band of 35-45x – to factor in the risks to the margin recovery from rising competition and rising cost of capital,” said analysts from Nomura Financial Advisory and Securities (India). The broking firm’s target price for Havells stock is now ₹1,232, down from ₹1,361 earlier. Havells shares are currently trading at around ₹1,005 after declining almost 33% over the past year.
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