Shares of Havells India tanked 4 per cent in Thursday’s trade after the company reported a weak set of quarterly results.
The consumer electrical goods maker, post market hours of Wednesday, said its consolidated profit fell 38.15 per cent to Rs 187.01 crore for the September quarter, as commodity inflation hit margins.
Following the development, the stock fell 4.45 per cent to hit a low of Rs 1,192.75 on BSE.
“We model Havells to report revenue and PAT CAGR of 20.6 per cent and 21.4 per cent over FY22-FY24E. However, we cut earnings estimates to factor in weak profitability in Q2FY23,” said ICICI Securities while suggesting a revised target of Rs 1,550 from Rs 1,621 earlier.
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The decline in commodity prices has caused price volatility, especially in the cable segment, said Arafat Saiyed – Senior Research Analyst at Reliance Securities.
“The overall revenue growth is on track, aided by a revival in Capex and higher prices. The revival of Lloyd is likely to continue with a complete product range in the next couple of years by adding washing machines and refrigerators. We expect a strong uptick for Havells over the next couple of years, led by improving operating efficiency, better return ratios and a likely revival in Lloyd’s business, led by structural changes,” Saiyed said.
Havells said its revenue from operations advanced 13.63 per cent to Rs 3,679.49 crore for the quarter compared with Rs 3,238.04 crore in the corresponding quarter last year.
“It was a decent revenue growth considering the inflationary environment. Margins were adversely impacted due to commodity cost fluctuation. We believe that margins have hit the trough and are expected to improve hereon. The demand outlook remains positive,” PTI reported Chairman and Managing Director Anil Rai Gupta as saying.
The company said there was a reasonable demand environment with real estate upcycle and infrastructure investment, but consumer demand was slightly sluggish, though stable.
The margin for the quarter was impacted owing to the full absorption of high-cost inventory against falling sales prices, it said. The impact was pronounced in Cables and Lloyd, it added.
“We believe that margin have hit the trough. Sequential margins from Q1 are stable and will improve from this quarter,” the company said.
