Havells India Q2 results fall short of Street estimates; should investors buy, sell or hold the FMEG stock?

Fast moving electrical goods (FMEG) company Havells India's shares faced selling pressure on Friday, a day after the Noida-headquartered firm reported a weak set of financial results for the July-September period. The stock of Havells India stock—which manufactures a host of consumer and industrial goods including fans, lights, water heaters, and professional lighting, wiring, and solar solutions—fell by as much as Rs 30.7, or 2.3 per cent, to Rs 1,331 apiece in morning deals on BSE. 

All eyes were on a conference call by the management scheduled to take place at 11 am. 

After market hours on Thursday, Havells India reported a standalone net profit of Rs 249.1 crore for the quarter ended September 30, a jump of 33.3 per cent compared with the corresponding period a year ago. Its quarterly revenue increased 6.1 per cent on a year-on-year basis to Rs 3,891.2 crore, according to a regulatory filing. 

The FMEG company fell short of estimates on both fronts. According to Zee Business research, Havells India was estimated to report a quarterly standalone net profit of Rs 265 crore and revenue of Rs 4,176 crore. 

The company posted an increase of 9.5 per cent in the cost of raw materials and components consumed to Rs 2,262.9 crore for the period under review. 

It registered growth in the switchgears and cables segments, and contraction in the lighting and fixtures, and electrical consumer durables unit. 

Revenue from switchgear increased 9.1 per cent to Rs 532.4 crore, and from cables expanded 8.1 per cent to Rs 1,470.2 crore. Revenue from lighting and fixtures declined 0.1 per cent to Rs 396.5 crore and that from electrical consumer durables declined 5.2 per cent to Rs 733.1 crore. 

The company reported Rs 373 crore in earnings before interest, taxes, depreciation and amortisation (EBITDA) for the three-month period, marking a rise of 30 per cent but again falling short of estimates. Zee Business analysts had pegged Havells India's quarterly EBITDA at Rs 391 crore. 

The FMEG company's margin improved by 180 basis points on a year-on-year basis to 9.6 per cent. 

EDITOR'S TAKE | Weak results on all parameters  

Zee Business Managing Editor Anil Singhvi said the latest quarterly numbers from Havells India were weak on all fronts. 

He sees support for Havells India futures emerging at Rs Rs 1,322 and Rs 1,332 levels.

One can expect a higher level in the futures at Rs 1,366 and Rs 1,384 levels, he said. 

What analysts make of Havells India Q2 results

Morgan Stanley maintained an 'overweight' rating on Havells India after the earnings announcement. The brokerage maintained its price target at Rs 1,349 for the stock, implying a downside of almost one per cent from the previous close.

Nomura retained a 'neutral' call on Havells India with a target of Rs 1,410. 

Havells India shares: Past performance

Havells India shares finished the September quarter 8.3 per cent stronger, sharply outperforming a 2.4 per cent gain in the headline Nifty50 index.  

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