• Cables Margin: Impacted by steep volatility in commodity prices and high-cost inventory absorption.

• Advertising Spend: Increased due to the advancement of the festive season, moderating margins.

• New Cables Plant: Commissioned in Tumkur, with additional CapEx of INR450 crores committed for expansion.

Release Date: October 17, 2024

• Warning! GuruFocus has detected 4 Warning Signs with BOM:517354.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Havells India Ltd (BOM:517354) 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.