Havells India managed a decent revenue performance for the quarter ended December (Q3) despite the challenges. Nevertheless, pressure on operating margins weighed on results, with net profit for the period down 12% year-on-year.
Overall revenue increased 15% year-over-year, with most segments except Lloyd contributing to the growth. Home appliance sales were boosted by festive demand, pushing growth in the electrical consumer durable (ECD) segment to 14% year-on-year. The measure could have been better had it not been for the inflation of input costs and the fear of Omicron hitting dealer levies.
Company management said festive demand was encouraging, but demand declined in the latter part of the third quarter.
The infrared and industrial segments also showed signs of recovery, with the switchgear segment posting 13% year-on-year growth and the lighting segment recording a 15% increase in its sales. The company said the consumer lighting segment showed a healthy mix of volume and value growth. Meanwhile, rising commodity price inflation driving price hikes means the cable segment saw 33% year-on-year growth.
Omicron-led uncertainties had a greater impact on major appliance stocking at dealer level, which had a greater impact on Lloyd’s range of appliances, with segment sales down 9% from one year to the next.
High input cost inflation affected the company’s operational performance, prompting Havells to take calibrated price increases amid continued weak demand, resulting in only a partial pass-through of higher costs. Advertising and promotional spending has also returned to normal levels.
As a result, the operating margin declined to 12.1% from 16% in the prior year quarter, and was lower than analysts’ estimates. Analysts at Jefferies India Pvt Ltd said margins fell short of their estimates, hurt by high raw material costs and the lag effect in price increases, particularly for consumer durables.
With a lack of operational performance and margins, the stock lost more than 3% when opening trades on Friday.
The short-term outlook remains clouded by commodity price inflation and the Omicron spread. Analysts, however, have a positive opinion on the title.
Analysts at Yes Securities Ltd said: “We expect the stock to continue trading at higher valuations given that it was able to deliver double-digit revenue growth even in a challenging environment”. revenue growth front.
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