Havells gathers speed to hit all-time high; analysts divided over its prospects

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Shares of Havells India Ltd surged on Thursday after the company reported its Q4 financial results. The stock has hit a fresh high at ₹1,706.85 and traded at ₹1,669.20 on the NSE, up 0.31 per cent as of 1.03 pm. . 

The brokerages’ call for the stock gained mixed reactions, divided over the company’s prospects.

The company on Tuesday reported an increase of 24.76 per cent in its consolidated net profit to ₹446.70 crore for the March 2024 quarter as against ₹358.04 crore in the March quarter a year ago.

Global brokerage Nuvama and Jefferies assigned/ maintained the ‘hold’ rating, while UBS and HSBC assigned ‘buy’ rating with an increased target price of ₹2,040 and ₹1,800, respectively. 

JM Financial maintained its ‘buy’ call with a revised target price of ₹1,680 as against ₹1,580 earlier. “We raise our EPS estimates by 11 per cent /6 per cent for FY25/26 respectively to reflect a) better-than-expected margin performance in Lloyd (-1 per cent vs. -2 per cent earlier for FY25; 2.5 per cent in FY26 vs. 2 per cent earlier), and b) modest improvement of 30bps in ex-Lloyd businesses. We revise our estimates by 8%/5% for FY25/26 respectively to reflect margin uptick,” the report said.

It also pointed out the delayed recovery in demand and heightened competitive intensity, particularly in RAC, as key risks. 

Meanwhile, CLSA downgraded the stock to ‘sell’ and fixed the target price at ₹1,560, noting that Q4 numbers were ahead of estimates at better margins, while the top line was lower.

Domestic brokerage Motilal Oswal downgraded the stock to neutral. However, the brokerage raised the EPS estimates for FY25/FY26 by 4 per cent/5 per cent to account for better margins in the cables and switchgear businesses. “We value the stock at 55x FY26E EPS to arrive at our target price of ₹1,780 with a 7 per cent potential upside,” it said. 

Analysts of Motilal Oswal believe that investments in strengthening the brand equity of Lloyd and increasing the distribution network would benefit the company in the long run. 

Citi has also maintained its neutral stance with a target price at ₹1,814.

Meanwhile, the analyst of Prabhudas Lilladher maintained ‘accumulate’ rating at a DCF-based target price of ₹1,774 (earlier ₹1681), which implies 54x FY26 EPS.

“We believe the company to focus on growth in the coming year with restricted margins. We estimate Revenue/EBITDA/PAT CAGR of 15.6%/24.5%/26.8% for FY24-26E with ECD/Cables/Lloyd segments revenue CAGR of 13.5%/18.0%/16.2% over FY24-26E and EBITDA margin to reach 11.5% by FY26E (+160bps),” Praveen Sahay of Prabhudas Lilladher said.