Havells India Limited
Havells India Limited is a leading Fast Moving Electrical Goods (FMEG) Company
and a major power distribution equipment manufacturer
The company produces a wide range of products including home appliances,
lighting solutions for residential, commercial, and industrial use, LED lighting, fans,
switches, wiring accessories, water heaters, circuit protection switchgear, cables,
induction motors, and capacitors, among others
Investment Rationale Share Price Since Listing
• India is witnessing the beginning of a real estate boom and 1800
Havells is well to ride the trend. 1600
1400
• It is a well-established brand in India with a dominant market
1200
position.
1000
• History of strong financial performance with healthy margins 800
and return ratios 600
• Foray into the kitchen appliances segment improves growth 400
outlook 200
• Havells has displayed strong revenue growth over the years 0
2002 2006 2010 2014 2018 2022
Key Finanicla Metrics Mar-20 Mar-21 Mar-22 Mar-23 Mar-24
Total Sales 9440.3 10457.3 13938.5 16910.7 18590.0
Sales Growth (YoY %) -6.29% 10.77% 33.29% 21.32% 9.93%
Gross Profit Margin (%) 24.32% 25.23% 21.45% 19.61% 24.06%
EBITDA Margin (%) 11.30% 15.20% 12.74% 9.58% 9.91%
Net Profit Margin (%) 6.66% 8.19% 7.44% 5.29% 5.50%
Earnings Per Share (In Rs) 10.0 13.7 16.6 14.3 16.3
EPS Growth (YoY %) -5.30% 36.27% 21.01% -13.84% 14.24%
Dividend Per Share (In Rs) 4.0 6.5 7.5 7.5 9.0
DPS Growth (YoY %) -11.11% 62.50% 15.38% 0.00% 20.00%
Key Finanicla Ratios Mar-20 Mar-21 Mar-22 Mar-23 Mar-24
Price to Earning 40.8 62.9 60.3 69.4 74.7
EV/EBITDA 25.3 36.7 36.5 40.85 43.94
EV/Sales 3.1 6.2 5.0 4.3 4.9
Price to Book Value 7.0 12.7 12.0 11.2 12.8
Return on Equity (%) 17.05% 20.17% 19.93% 16.17% 17.06%
Return on Capital Employed (%) 19.46% 24.86% 24.09% 20.22% 21.51%
Valuation
• Havells usually trades at a mean PE of 53x, however currently Havells is trading at a PE of 83.5, and the
market is discounting the next two-quarter growth.
• However, the current valuations look expensive and buying on dips is going to be a prudent strategy
Margins
• Margin expansion will be gradual. In Q4FY24, EBITDA surged by 20%, driven by higher sales, with
margins up by 80bps YoY to 11.7% due to cost rationalization and Lloyd's profitability.
• Lloyd's profitability is expected to improve in the near term with summer product sales momentum.
Strengths
• Diversified Business Segments: Presence in diversified business segments with a strong market position.
• Wide Product Portfolio: Offering a diversified product portfolio including cables, electrical appliances,
switchgear, and lighting.
• Strong Brand Recall: Established market position with premium positioning of major brands like Havells,
Crabtree, Standard, Reo, and Lloyd.
• Extensive Distribution Network: Presence in 3,000 towns in India with a distribution network of 17,000
direct dealers and 2.22 lakh retailers.
• Experienced Management: Led by Anil Rai Gupta, maintaining a successful track record over decades.
Challenges
• Raw Material Intensity: Raw materials constitute nearly 80% of total operating costs, mainly including
copper, stainless-steel strips, G.I. wires, PVC & DOP, and aluminum.
• Variable Pricing Contracts: Orders typically have a mix of variable and fixed-price contracts.
• Margin Impact: Vulnerable to sharp fluctuations in raw material prices, potentially impacting margins until
adjustments can be made.
• Sustaining growth and margins: A slight dip in margins and growth will lead to sharp corrections due to
stretch valuations
