The brokerage said it believes that with worse-than-expected summer weakness and the Street’s imminent estimate cuts post the first quarter miss, Havells India’s earnings downgrade cycle could be largely behind. It said the Street has cut earnings estimates between 19% to 16% since September 2024 and that growth visibility should improve over financial year 2026-2028.
BofA said it had maintained a cautious stance on Havells on capacity bottlenecks and rising competition in cables, sluggish progress in Lloyd’s profitability and a weak summer. However, with these concerns behind and valuations down 22% from its peak, the risk-reward seems favourable.
In the medium term, Havells is well-placed to benefit from penetration-led growth in ACs and strong momentum in wires and cables.
Lloyd to see near-term growth impact
BofA said early monsoon has weighed on demand for cooling products, with AC and fan sales down 34% and 14%, respectively, for Havells, in comparison to expectations of a 15% growth. This resulted in elevated channel inventory in a seasonally-weak June to September quarter, the brokerage said.Additionally, the upcoming Bureau of Energy Efficiency (BEE) energy rating revision from January 2026 could further put pricing pressure as dealers try to clear stock, it said. The past BEE change led to costs going up by up to 10%, which could further impact margins, thereby creating an additional risk.
Festive tailwinds ahead
Despite the summer setback, Havells India is relatively better positioned among its consumer durable peers as ACs contribute only 30% of its sales. Meanwhile, the wires and cables segment is expected to continue its strong performance and its small appliances and lighting segments could see demand pick up in the second and third quarters, supporting sequential recovery, the brokerage added.Of the 44 analysts that have coverage on the stock, 32 have a “buy” rating, seven have a “hold” rating and five have a “sell” rating.
Shares of Havells India were trading 2.69% higher at ₹1,572.8 apiece at 2 pm on Tuesday, July 22. The stock has declined 6.3% this year, so far.
