Havells India shares fall 6% as margin pressure persists; Nomura reduces its price target

Consumption demand remained steady despite inflation, while price hikes helped offset higher input costs across much of its portfolio. However, operating margins declined by 30 basis points year-on-year, mainly due to volatility in aluminium and copper prices in the cables and wires (C&W) segment. Its Lloyd business also continued to face raw material inflation and seasonal under-absorption of costs.

Nomura lowered its price target on Havells India by over 9 percent to Rs 1,232 and retained its 'neutral' rating, citing risks to margin recovery from rising competition and the cost of capital. The brokerage raised its revenue estimate for FY27 by 6 percent but cut its earnings before interest, tax, depreciation and amortisation (EBITDA) margin estimate to 9.1 percent. It also reduced its earnings per share estimate for FY27 by 1-2 percent.

Nomura flagged rising competition in the cables and wires segment, including from Ultravolt, as a concern. Nuvama Institutional Equities cut its FY27 earnings per share estimate by 6 percent, citing expectations of higher losses at Lloyd. It reduced its price target by over 11 percent to Rs 1,430 but retained its 'buy' rating. Nirmal Bang Equities maintained its 'hold' rating and marginally raised its price target to Rs 1,190 from Rs 1,157.

It expects volume growth in the cables and wires segment, improved profitability in switchgear and expansion in renewables to support growth. However, volatility in aluminium prices and continued losses at Lloyd are likely to limit near-term margin expansion. HSBC retained its 'buy' rating on Havells India with a price target of Rs 1,400. It noted that the company reported strong revenue growth and profit largely in line with market estimates, with the margin drag mainly coming from the cables and wires segment.

The brokerage said management indicated that further price increases of around 5-7 percent may be required across products in the December quarter. Jefferies maintained its 'hold' rating with a price target of Rs 1,220. It said revenue growth of 35 percent in the September quarter was driven by the cables and wires segment, supported by the pass-through of copper costs, and double-digit volume growth in switchgear.

A low base in room air conditioners also supported growth. Profit after tax rose 11 percent, in line with Jefferies' estimates, while operating margin stood at 9 percent, supported by price hikes averaging 10-15 percent over the past 12 months. The company has taken cumulative price hikes of over 30 percent in the C&W segment over the past 12 months. The management indicated that further product-specific price increases of around 5-7 per cent may be needed amid continued raw material inflation.