Release Date: October 17, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Havells India Ltd (BOM:517354, Financial) reported healthy performance across categories, driven by improved consumer demand and festive season sales.
- The company commissioned a new cables plant in Tumkur, indicating a commitment to long-term growth with additional CapEx of INR 450 crores.
- Lloyd, a subsidiary of Havells, showed decent growth and benefited from cost efficiency initiatives.
- The company is witnessing good growth in emerging categories such as personal grooming, air coolers, and water purifiers.
- Havells is making strategic investments in expanding its retail and rural channels, which are expected to drive future growth.
Negative Points
- Volatility in commodity prices negatively impacted the margins of the cables segment due to high-cost inventory absorption.
- The industrial switchgear business experienced a decline, affecting overall growth in the switchgear segment.
- Increased advertising spend due to the early festive season led to moderated margins across categories.
- Employee costs have risen due to expansion efforts, impacting short-term profitability.
- The lighting segment faced pricing deflation, affecting EBIT margins despite holding up contribution margins.
Q & A Highlights
Q: What is the sustainable growth rate for the switchgear segment?
A: Anil Gupta, Executive Chairman and CEO, mentioned that while there was a degrowth in the industrial switchgear business this quarter, the residential switchgear segment experienced decent growth. Going forward, they expect a lower double-digit growth rate once industrial demand picks up.
Q: How is the emerging category performing, and which products are gaining traction?
A: Anil Gupta noted that the personal grooming, air cooler, and water purifier segments are witnessing good growth. Solar is also performing well. These categories are still in the investment phase, but they expect to separate out one or two products for tracking by next year.
Q: How is the festive season demand looking for Havells?
A: Anil Gupta stated that the quarter started positively, partly due to the early Diwali this year. They are experiencing better growth compared to last year, with a lot of positivity on the consumer side.
Q: What is the outlook on employee costs given the recent expansions?
A: Anil Gupta explained that the increased employee costs are due to investments in fortifying newer channels, especially in rural areas and model format retail. These are seen as investments for the future, and costs will normalize as sales increase.
Q: Will Havells return to industry-leading margins?
A: Anil Gupta affirmed that Havells aims to maintain margin leadership in consumer durables, lighting, and switchgear. While Lloyd is still in the investment phase, they expect to return to normalized margin levels soon.
Q: How are the lighting and ECD divisions performing, and what is the outlook for FY '26?
A: Anil Gupta highlighted that both divisions are doing well in premiumizing their portfolios, leading to industry-leading contribution margins. They expect to return to their usual margin levels by FY '26.
Q: What is the status of Lloyd's growth in RAC versus other segments?
A: Anil Gupta noted that the non-AC segment, including washing machines and refrigerators, showed better growth than the AC segment this quarter. This is seen as a positive development as they focus on building other product categories.
Q: How is the cable and wire segment performing, and what is the outlook?
A: Anil Gupta mentioned that while the first quarter saw lower growth due to fluctuating raw materials, the second quarter experienced a good pickup. With new capacities at Tumkur, they expect decent growth in both underground cables and wires.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
