Whalesbook
Havells India Ltd. reported a modest 5% year-on-year revenue growth for the September quarter (Q2FY26), reaching ₹4,779 crore. This subdued performance was attributed to a weaker-than-usual summer season impacting sales of cooling products and an overhang of high channel inventory for consumer appliances.
The company's cables business emerged as a strong performer, registering a 12.4% year-on-year revenue increase driven by robust demand for power cables. Furthermore, contribution margins in the cables segment significantly improved to 17.7% from 12.3% in the prior year's quarter, boosting overall profitability.
In contrast, the electrical consumer durables (ECD) division, which includes fans and small appliances, saw a 2% dip in revenue and a decrease in margins to 21% from 23.3% year-on-year. The air conditioning and TV arm, Lloyd-Havells, faced significant challenges, with revenue dropping 18.5% year-on-year. Lloyd's contribution margins nearly vanished, falling to 1.7% from 14%, mainly due to lower sales volume and increased consumer offers aimed at clearing inventory.
Management expressed optimism for a rebound in the second half of FY26, anticipating normalization of channel inventories by the end of Q3FY26 and expecting new energy efficiency norms to stimulate demand. Despite these expectations, several brokerages have trimmed their earnings estimates for Havells India. The stock has declined 10% year-to-date, underperforming the Nifty50 index.
Impact: This mixed earnings report, particularly the struggles in consumer durables and Lloyd's, could negatively affect investor sentiment in the short term, although the strong performance in cables and the outlook for H2 provide some relief. The earnings estimate cuts by brokerages add to the cautious view. Rating: 7/10
Definitions:
Channel Inventory: The stock of goods held by intermediaries in the distribution chain, such as distributors, wholesalers, and retailers, before they reach the end consumer.
Contribution Margin: A measure of profitability calculated by subtracting the variable costs associated with producing and selling a product from its net revenue. It indicates how much revenue contributes to covering fixed costs and generating profit.