Havells India shares declines 9% on margin disappointment in Sept Qtr

Havells India shares declines 9% on margin disappointment in Sept Qtr

Havells India’s stock fell 9% to Rs 1,279 on the BSE in intraday trade on Thursday, as profit-taking followed the consumer electronics company’s disappointing operating performance in the July-September quarter (Q2FY22).

The company’s earnings before interest, taxes, depreciation, and amortisation (Ebitda) margin fell 338 basis points to 13.8 percent year over year, owing to increasing raw material costs. During the quarter, net profit was Rs 302 crore, down 7% year on year.

Havells India stated that supplement margins had been maintained on a quarter-on-quarter (QoQ) basis, despite continued high price demand. “Cable margins were hurt by continued commodity price volatility. Due to the hyper-competitive environment in Lloyd, an adequate price rise has proven difficult. “Overhead absorption was under-absorbed as a result of lower production,” the business claimed.

However, the company’s revenue increased by 31% YoY in Q2FY22, to Rs 3,221 crore, thanks to strong performance from the cable, switchgear, electrical consumer durables, Lloyd, and lighting segments.

“Havells India’s performance in Q2FY22 exceeded our expectations on all fronts. We expect that increased demand for consumer products such as fans, lighting, and air conditioners, in which Havells is a significant player, will be aided by a recovery in the real estate sector. In a note, ICICI Securities wrote, “We anticipate management commentary on the long-term viability of the EBITDA margin.”

Meanwhile, Motilal Oswal Financial Securities, a brokerage, noted that considering the change in copper values, revenue increase of 46% YoY had been the most powerful in cables. However, the company’s total margin has been dragged down, and profit before interest and tax (PBIT) in the cables business has fallen short of forecasts.

At 09:56 hrs Havells India was quoting at Rs 1,290, down Rs 115.35, or 8.21 percent on the BSE.

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