Havells, a diversified consumer durables manufacturer has reported a pricing-driven revenue growth in the last one year. This while margin improvement remains muted owing to higher raw material costs and lack of operating leverage from lower volume growth . While the industrial facing segments fare relatively well, the consumer facing segments have not. We earlier recommended investors accumulate the stock on dips in Feb-2025 based on scope for margin improvement, continued growth in RAC (room air conditioners) and cables & wires segment. Only the cables & wires growth played out as weak summer sales last year impacted consumer sales and high raw material prices have impacted overall margins. Since our last call in February last year, the stock is down 25 per cent. We now recommend investors to hold the stock for the following reasons. Scope for better growth following weakness last year, waning impact of higher commodity prices that have been passed on, and moderated valuations are supporting to stock currently. The stock is now trading much lower to historical levels at 40 times one year forward earnings compared to 52 times five-year average and hence appears to factors concerns stemming from weakness in the previous year. Earnings estimates from Bloomberg expect flat earnings growth in FY27 but stronger growth in FY28 as margin improvement plays out.
Segment review
Industrial segments of Cables & Wires and Switchgears accounting for half of the revenues are better placed on growth and margins as shown in the figures.
Switchgear’s growth momentum was interrupted by middle east conflicts which restricted shipping lanes (15 per cent exports) and is expected to recover as alternate routes and markets are established.
Cables and Wires, which is the leading segment, reported 27 per cent YoY growth in Q1FY27 but with flat volume growth. As prices of Copper had risen sharply, the company was able to pass on the cost, but volume growth has been impacted. As copper price rally stabilises volumes are expected to recover along with higher pricing, in remainder of FY27 supporting growth. The segment faces strong demand from government infrastructure push, emerging sectors (solar and Data centers), and existing power and real estate demand. The company is also adding capacity with a ₹1,000 crore capex plan for FY27 (primarily Cables and refrigeration segment and a R&D center) which should support the segment.
Consumer division (lights, Electrical Consumer Durables and Lloyds in RAC and cooling products) is gradually recovering in Q1FY27 following a difficult FY26. GST rate cuts, lower interest rates for financing, and higher disposable income from lower taxes failed to aid the sector growth last year. Lloyds’ RAC division (along with the industry) was impacted by weak summer demand last year, following several years of strong sales. Lloyds reported revenue CAGR of 31 per cent in FY22-25 and a 22 per cent decline in FY26. With a low base, normalized channel inventory, and if aided by warmer weather, the RAC growth is likely to resume growth. The company is expanding refrigerator and RAC capacity in Lloyds as well.
Havells has carved out renewable segments where it has launched solar inverters, solar pumps, EVSE (Electric Vehicle Supply Equipment) and allied products. The fast-growing segment (21/236 per cent QoQ/YoY growth in Q1FY27) contributed 4 per cent to Q1FY27 growth. Havells has bought a 9 per cent strategic stake in Goldi Solar (solar cells and module manufacturer) for ₹600 crore in Oct-2025 to secure a solar supply chain. Havells’ presence in white goods distribution, experience in manufacturing electric goods including EPC contracts and the secure supply chain – should ensure high growth from the segment.
Margin performance
The company’s EBITDA margin declined from 12.7 per cent in FY22 to around 10 per cent in FY26 and to 7.2 per cent in Q1FY27. But the latest quarter is due to advertising expenses doubling to 4.4 per cent in quarter. This is an investment for consumer segment and will likely normalize in the year. Revenue growth and financials as shown in the figure. The company has a strong balance sheet with net cash position adjusted for debt.
The overall margin weakness is again tied to consumer segments. Lighting segment is only recently stabilizing prices after an elongated period of price decline from Chinese competition (across industry). Similarly, intense competition impacted performance in fans, electric heaters and other products in electric consumer durables division as well.
Havell’s Lloyds division which is led by RAC sales, posted 2.3 per cent EBIT margins in FY25 upending previous three years of EBIT losses (average 4.7 per cent) as the division was scaling up. With sales declining by 22 per cent in FY26, the division EBIT margins again declined to -5.4 per cent in FY26. The segmentexpects to record profitability in FY27. The recent price pass through should alleviate pricing pressure in the segment as the whole industry undertook the same. The price pass through includes both raw materials cost increase and the changes from BEE ratings starting Jan-2026 with stricter measures for energy ratings. While the impact on volume growth should be limited, it should gradually improve. The GST rate cuts have offset the price increases and shielded the end user to an extent. The company is also revamping its distribution set-up to focus on being a sell-out brand (retailer to end user) than just a sell-in brand (manufacturer to retailer).
Why
Revenue growth from cost pass through
Margin improvement needs volume growth
Valuations have moderated