Havells India falls for third straight day, hits fresh 52-week low

Analysts believe recovery in business would be slower for Havells India as compared to peers' due to higher exposure to real estate/industrial products and higher share of premium products

Shares of Havells India were trading lower for the fifth straight day, slipping 4.4 per cent to fresh 52-week low of Rs 447 on the BSE on Wednesday amid concerns about slower recovery in business as compared to peers.

Thus far in the month of May, the stock has underperformed the market by falling 21 per cent, after reporting weak numbers across all segments. In comparison, the S&P BSE Sensex declined 9.6 per cent in the same period.

Havells India’s standalone revenue during the January-March quarter (Q4FY20) declined by 19.5 per cent year-on-year (YoY) to Rs 2,216 crore due to significant impact of lockdown and slowdown in infrastructure and real estate (impacting B2B business).

The company’s profit before tax (PBT) during the quarter down by 34 per cent at Rs 198 crore; while net profit decreased by 12 per cent at Rs 177 crore over the previous year quarter. Margin pressure was eased by some reversal in provisions in employee costs and lower advertising & promotion (A&P) spends.

Analysts at YES Securities believe that the recovery in Havells India's business would be slower compared to peers’ due to higher exposure to real estate/industrial products and higher share of premium products.

"Lost sales on account of COVID-19 were higher than expected at Rs 800 crore (or 25 per cent of 4QFY20), resulting in 13 per cent/16 per cent miss in revenue/adjusted profit after tax. Moving lockdown timelines and the likely impact on demand revival and industrial-related business leads us to cut our FY21/FY22E EPS by 30 per cent/13 per cent as we build in some conservatism," Motilal Oswal Securities said in a note.

"Yet, our confidence in Havells business model stands firm due to its cost rationalization efforts (employee cost/ad-spends) and superior working capital management – two vital business levers unique to Havells India v/s peers," the brokerage firm said with ‘neutral’ rating on the stock.

At 10:04 am, Havells India was trading 3 per cent lower at Rs 453 on the BSE, as compared to 1.2 per cent rise in the S&P BSE Sensex. A combined 2.8 million equity shares have changed hands on the counter on the BSE and NSE so far.