Whalesbook
Wires & Cables Momentum Sustains
The wires and cables segment, a significant 40 percent contributor to Havells India’s Q3 FY26 revenue, delivered a robust 33 percent year-on-year expansion. This performance was underpinned by volume growth exceeding 20 percent and enhanced realisations, partly due to rising copper prices. Primary sales remained strong, supported by channel stocking, though export markets faced pressure from US tariffs. Capacity utilisation for wires and cables stands at approximately 65-70 percent and 90-100 percent respectively, signalling a need for expansion. Havells is investing Rs 450 crore to boost its Tumakuru facility's capacity and is planning further expansion for medium/high-voltage and underground cables by FY27 to meet infrastructure demand. Segment EBIT margins expanded by 70 bps YoY to 11.8 percent.
ECD and Lighting Face Headwinds
The Electrical Consumer Durables (ECD) segment saw a 4.3 percent year-on-year revenue growth, primarily impacted by weak demand for cooling products. However, a 37 percent sequential improvement was noted, driven by winter categories like heaters. Fans and air coolers continue to struggle with high channel inventories, expected to weigh on near-term sales. Segment margins improved by 150 bps YoY, suggesting early stabilisation. The lighting segment recorded a 4.1 percent YoY revenue decline, attributed to the shift in the festive season. Subsidiary Lloyd reported a 6.5 percent YoY revenue drop, with EBIT margins at -8.1 percent, though channel inventories are normalising.
Switchgear Strength and Solar Investment
In contrast, the switchgear segment displayed robust growth, up 8.1 percent year-on-year, buoyed by demand from real estate and project segments. Industrial switchgear faced a high base from the prior year's large orders. The segment's EBIT margins expanded significantly by 380 bps YoY, driven by operating leverage and execution improvements. Havells is also strategically bolstering its presence in renewable energy by signing a term sheet to invest Rs 600 crore for a 9.24 percent stake in Goldi Solar Pvt Ltd, a solar module and inverter manufacturer. This investment aims to secure crucial component supply and complement its existing solar product offerings.
Valuation Concerns and Outlook
Trading at approximately 45 times FY28 estimated earnings, Havells India's stock reflects substantial medium-term growth potential, leading to elevated valuations. While the long-term outlook for the wires & cables and solar segments remains positive, potential overcapacity risks from industry-wide expansions and the near-term weakness in cooling products present challenges. The current valuation offers limited margin for safety, suggesting a cautious stance for investors.