Havells India Ltd. is a major player in India’s Fast-Moving Electrical Goods (FMEG) sector. Founded in 1958 by Qimat Rai Gupta, the company has become synonymous with innovation, premium quality, and consumer trust. Over the years, Havells has diversified its product portfolio, gaining market leadership in various categories, such as switches, cables, fans, and consumer appliances. With a strong brand presence and wide distribution network, it caters to both industrial and residential markets.
Currently, the stock of Havells is trading at ₹1,850 as of October 18, 2024, reflecting investor confidence despite a high PE ratio of 81.3, aligned with industry peers. In this blog, we will explore Havells’ financial performance, growth potential, and fundamental analysis, diving deep into the company’s strengths and challenges.
Table of Contents
Summary of Havells India: Position in the Market
Havells India is one of the leading FMEG companies with a stronghold in both domestic and international markets. Its revenue streams are well-diversified across various product lines, including cables, switchgear, fans, lighting, and consumer appliances. The company holds dominant market shares in multiple segments, including 26% in fans, 27% in residential pumps, and 20% in water heaters.
Havells operates under several premium brands such as Havells, Crabtree, Lloyd, Standard, and REO, each catering to specific market segments. Its acquisition of Lloyd in 2017 has further strengthened its position in the air conditioning and white goods market.
With a strong focus on in-house manufacturing, Havells owns 14 manufacturing facilities across India, ensuring quality control and efficient production. The company’s extensive distribution network covers over 210,000 retailers and 14,000 direct dealers, cementing its reach in urban and rural areas alike.
Financial Analysis: A Closer Look at Havells’ Performance
The financial snapshot of Havells, as shown in the image, reflects a solid performance over the past few years, with consistent growth in sales, net profit, and operating profit. Let’s break down some key financial metrics.
Sales and Profit Trends:
Havells has demonstrated robust growth in sales and profitability, as evident from the following data:
- Sales: In FY18, Havells recorded sales of ₹8,116 crores, which steadily increased to ₹16,911 crores in FY23 and is predicted to reach ₹20,508 crores by FY25.
- Operating Profit: Havells’ operating profit grew from ₹1,033 crores in FY18 to ₹1,775 crores in FY22. A further rise to ₹2,238 crores is projected by FY25, reflecting strong operational efficiency.
- Net Profit: Net profit saw a consistent upward trend, growing from ₹661 crores in FY18 to ₹1,196 crores in FY22, with a forecasted increase to ₹1,402 crores by FY25.
Earnings Per Share (EPS):
The company’s EPS has seen a significant rise over the years:
- FY18: ₹10.60 per share
- FY23: ₹17.11 per share
- Prediction for FY25: ₹22.37 per share
This upward trend in EPS reflects the company’s ability to generate higher profits per share, making it attractive to investors looking for earnings growth.
Operating Profit Margin (OPM):
The Operating Profit Margin (OPM) of Havells indicates a fluctuating trend, peaking at 15.20% in FY21, before declining slightly to 9.59% in FY23. However, the margin is expected to recover and stabilize at 10.92% by FY25. The dip in OPM for FY23 might be attributed to rising input costs or higher expenses, but the company’s long-term outlook remains promising.
Return on Equity (ROE):
ROE is an important metric for investors, as it highlights the company’s ability to generate returns on shareholders’ equity:
- FY18: 17.72%
- FY22: 16.18%
- Projection for FY25: 18.64%
Despite some fluctuations, the projected ROE for FY25 indicates an improvement, demonstrating Havells’ consistent ability to reward its shareholders.
Asset and Liability Distribution
Asset Distribution:
Havells’ total assets, amounting to ₹12,433 crores, are well-diversified, with the largest share allocated to Other Assets (₹8,126 crores), followed by Fixed Assets (₹3,988 crores). Smaller portions are invested in CWIP (₹299 crores) and Investments (₹20 crores). The company’s strategic allocation in investments highlights its efforts to generate returns and maintain liquidity.
Liability Distribution:
The company’s liabilities are primarily made up of Strong Reserve (₹7,384 crores), followed by Other Liabilities (₹4,683 crores), Borrowings (₹303 crores), and Equity Capital (₹63 crores). The limited borrowings indicate Havells’ prudent capital management, while the strong reserves demonstrate its financial strength.
Stock Price Outlook and Targets
As of October 18, 2024, Havells India is trading at ₹1,850 with a PE ratio of 81.3, which is aligned with its peers in the FMEG sector. Although the high PE ratio may seem expensive, it reflects the market’s confidence in the company’s growth potential.
Short-Term Target (3 Months):
Given the company’s strong fundamentals, improving margins, and growing earnings, Havells is likely to see a modest upside in the short term. The short-term target for the next three months is ₹1,950, with a stop-loss at ₹1,750.
Long-Term Target (12 Months):
In the long run, Havells’ expanding market share, robust distribution, and operational efficiency make it a promising investment. The long-term target is set at ₹2,250, with a stop-loss at ₹1,700, providing substantial upside for long-term investors.
FAQs
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Conclusion
Havells India continues to solidify its position as a leader in the FMEG sector with a well-diversified product portfolio, strong brand recognition, and consistent financial performance. Its ability to generate sustainable growth through in-house manufacturing, a robust distribution network, and prudent capital management makes it a reliable large-cap stock for both short-term and long-term investors.
As Havells focuses on innovation, premiumization, and market expansion, it is poised for further growth, making it a promising candidate in any well-balanced portfolio. With solid fundamentals and promising future prospects, Havells India is set to shine in the coming years.
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