Havells India shares declines by 9%, record low operational performance in September quarter

The company’s profits before interest, tax, depreciation and amortisation (Ebitda) margin dwindled 338 bps year-on-year (YoY) to 13.8 per cent, largely due to greater raw material expenses.

Shares of Havells India dropped 9 per cent to Rs 1,279 on the BSE in Thursday’s intra-day trade on profit booking after the user electronics company recorded a low operational performance in the July-September quarter (Q2FY22).

The company’s profits before interest, tax, depreciation and amortisation (Ebitda) margin dwindled 338 bps year-on-year (YoY) to 13.8 per cent, largely due to greater raw material expenses. Net profit was dropping 7 per cent YoY at Rs 302 crore through the quarter.

Havells India said the supplement margins had been maintained on a quarter-on-quarter (QoQ) basis, although price demand persists significantly high. “Continued volatility in commodity prices impacted cable margins. Adequate price increase in Lloyd has been challenging due to the hyper-competitive environment. Margins were further impacted by under absorption of overheads due to lower production,” the company said.

However, in Q2FY22, the company posted a robust 31 per cent YoY revenue growth at Rs 3,221 crore, behind the healthful performance from the cable, switchgear, electrical consumer durable, Lloyd and lighting segment.

“Havells India’s Q2FY22 performance was better than our estimate on all fronts. We believe a revival in the real estate sector will help drive incremental demand for consumer products like fans, lightings, air conditioners, etc., where Havells is a major player. We await management commentary on the sustainability of EBITDA margin going forward,” ICICI Securities said in a note.

Meanwhile, brokerage Motilal Oswal Financial Securities said that revenue growth of 46 per cent YoY had been the most powerful in cables as required, given the change in copper values. However, it continued that margin has deceived, pulling overall margin for the company and profit before interest and tax (PBIT) in the cables segment has dropped expectations.

At 09:44 am, Havells India was trading 7.5 per cent lower at Rs 1,300 on the BSE, correlated to a 0.08 per cent slump in the S&P BSE Sensex. Despite today’s fall, the stock has surged 82 per cent against a 50 per cent surge in the benchmark index in the past year.

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