Havells India Regains ₹1 Lakh Crore Market Cap with 4 per cent Surge Despite Weak Q3 Earnings – Is It a Buy?

Interim dividend of ₹4 per share announced; record date set for January 22, 2025, with payouts by February 14, 2025

Havells India Ltd, a leading brand in the Fast Moving Electrical Goods (FMEG) sector, surged 3.89 per cent to a day’s high of Rs 1,617.95 on January 17, 2025, regaining a market capitalization of Rs 1 lakh crore after announcing its Q3FY25 earnings.

Despite posting weaker-than-expected results for Q3FY25, the company’s stock witnessed positive sentiment. Havells reported a 1.7% decline in net profit to Rs 283 crore, down from Rs 288 crore in Q3FY24, primarily due to increased labor and advertising costs, which impacted margins.

Revenue from operations, however, grew 11 per cent YoY to Rs 4,883 crore, while total expenses increased by 12.3 per cent YoY to Rs 4,564 crore. The company cited commodity price fluctuations, particularly affecting the wires segment, as a key factor in moderating overall revenue growth.

At the operating level, EBITDA fell marginally by 0.2 per cent YoY to Rs 432 crore, compared to Rs 433 crore in Q3FY24. Despite higher costs, gross profit saw a 15 per cent YoY increase, reflecting improved revenue realization.

The company declared an interim dividend of Rs 4 per equity share, with the record date set for January 22, 2025. Shareholders can expect the dividend by February 14, 2025.

Segment Performance

• Switchgears: Reported a 10.8 per cent YoY revenue growth to Rs 577 crore.
• Cables: Grew 7.3 per cent YoY.
• Lighting & Fixtures: Increased by 2.5 per cent YoY.
• Electrical Consumer Durables (ECD): Achieved robust growth of 15 per cent YoY, with a 16 per cent CAGR.
• Other segments: Showed a significant 22.8 per cent YoY growth.

While the ECD segment continued to perform well, its margins were affected by higher R&D and distribution costs. Relocation of an SG plant also contributed to a 23 per cent YoY rise in employee expenses and a 12 per cent YoY increase in other costs.

Valuation and Outlook

Havells trades at a PE multiple of 70.7x, aligned with the industry average of 69.8x and below its three-year median PE of 71.9x. Its EV/EBITDA of 41.5x also remains below the three-year median of 42.8x. The company boasts a strong return on capital employed (ROCE) of 24.4% and maintains an almost debt-free position with a debt-to-equity ratio of 0.04x.

Given positive consumer sentiment and robust industrial trends, Havells appears well-positioned in the electrical goods space. As of January 17, 2025, the company’s market capitalization stands at Rs 98,922 crore, with a trailing 12-month EPS of Rs 22.36.

Disclaimer: This article is for informational purposes only and does not constitute investment advice.