Investor-centric Analysis of Havells India Q3 FY25 Earnings Call

Risks

? The lighting segment has faced price erosion, which has impacted margins. The pricing environment remains challenging.

? The switchgear segment has seen a decline in margins due to a mix of factors, including plant relocation, under-absorption of manufacturing overheads, and a shift towards lower-margin project business.

? There has been a noticeable slowdown in consumer demand, particularly in the B2C segment, which has been weak for a couple of years.

? The depreciation of the rupee could lead to upward pricing pressure in the air conditioner segment

Opportunities

? Despite price erosion, the lighting segment has seen healthy volume growth of 13%-14% YoY.?

? The domestic appliances business, particularly water heaters and kitchen appliances, is expected to continue performing well.

? Havells is focusing on premiumization across its product categories, which is expected to improve margins over time.

? The company is investing in new channels, including MFR and QC, which are expected to drive future growth.

? The company is investing in backward integration for Lloyd, particularly in refrigerators and washing machines.

Industry-Specific Headwinds and Tailwinds

Headwinds:

? Fluctuations in copper and aluminum prices have impacted the cables and wires segment, leading to margin pressures.

? The lighting segment has been affected by deflation in LED prices, which has led to price erosion and margin compression.

? Increased competition in the switchgear and lighting segments has led to pricing pressures and margin erosion.

? Broader consumer sentiment has been weak, particularly in the B2C segment, which has impacted demand for consumer durables.

Tailwinds:

? The recovery in the residential real estate market is expected to drive demand for Havells' products

? The trend towards premiumization in consumer appliances is expected to benefit Havells, particularly in the Lloyd brand, where premium products are gaining market share.

Shifts in Customer Behavior

? Customers are increasingly opting for premium products

? Customers are increasingly purchasing through modern format retail (MFR) and quick commerce (QC) channels.

? There is a noticeable seasonal pattern in demand, with stocking for air conditioners starting in January-February and for fans in February-March.