RESULTS REVIEW 3QFY20 22 JAN 2020

Havells India
BUY
Worst is now behind INDUSTRY APPLIANCES
Havells reported another let down. Co has been i.e. (1) Took 3% price cut in ACs in Oct, (2) Arranging a visit CMP (as on 22 Jan 2020) Rs 600
challenged by (1) Slowdown (real estate, industrial and for distributors to the new Lloyd plant, (3) Focusing on new Target Price Rs 710
govt projects), (2) Liquidity issue leading to low trade range of ACs, and (4) Expanding portfolio by adding new Nifty 12,107
inventory and (3) WIP in Lloyd. We believe earnings range in W/M and entry in Refrigerator. Sensex 47,115
upcycle will begin from 4QFY20 onwards led by  Healthy Margin: GM expanded by 190bps YoY to 39.4%. KEY STOCK DATA
favourable base, channel filling opportunity and gradual Employee/ASP/Other expenses grew by 4/-15/-5%. EBITDA Bloomberg HAVL IN
recovery in demand. We cut our EPS by ~6% for FY20-22 declined by 9% to Rs 2,673mn vs. expectation of 5% No. of Shares (mn) 626
to factor slower recovery. We value Havells at 36x on Dec- growth. EBITDA margin at 11.8% was in-line. Contribution MCap (Rs bn) / ($ mn) 375/5,270
21 EPS, our TP is of Rs 710. Maintain BUY. margins for ECD/C&W was up by 132/174bps, while 6m avg traded value (Rs mn) 945
HIGHLIGHTS OF THE QUARTER Lighting/Switchgear/Lloyd declined by 67/167/700bps.
STOCK PERFORMANCE (%)
 Weak Core Business: Net revenues contracted by 10% STANCE 52 Week high / low Rs 807/588
(23/11% growth in the previous 8/4 qtrs) vs. exp of 4.7% 3M 6M 12M
growth. Core business was down by 9%, first time in the 17 Havells has consistently gained market share in most of its
Absolute (%) (11.5) (17.0) (15.7)
quarters. Cables posted 13% decline owing to 25% decline categories even during a challenging environment. Core
business will recover with improvement in demand trend Relative (%) (17.1) (25.1) (28.5)
in power cables. Domestic wires grew in low single digit.
and expected relief in liquidity in trade channels. Favourable SHAREHOLDING PATTERN (%)
ECD grew by mere 1% after posting 22% and 30% CAGR
over the last 4 and 8 quarters. Low stocking by channel in base over the next 4 quarters (10% decline in EBITDA) will Sep-19 Dec-19
fans (liquidity issue) and delayed winter were the key lead into an earnings upcycle. We expect margins to recover Promoters 59.52 59.52
factors for muted ECD. Switchgears and Lighting saw a faster than volume growth. Amidst slowdown, management FIs & Local MFs 5.82 5.89
decline of 5% and 7%. plans to tighten the belt on non-essential costs. We see FPIs 26.29 25.88
 Corrective measures in Lloyd: Lloyd revenues were down enough levers for margins to mean revert.
Public & Others 8.37 8.71
by 16% (in-line) owing to sharp fall in TV Panels. AC has We recently (2QFY20) upgraded stock to BUY post seeing Pledged Shares (%
16% fall in stock price. We expect worst is behind for Havells - -
recovered in 3Q and expect to do well in the upcoming of total shares)
season. Havells has initiated corrective measures in Lloyd and healthy performance will re-rate the stock. Source : BSE
Financial Summary (Standalone)
(Rs mn) 3Q FY20 3Q FY19 YoY (%) 2Q FY20 QoQ (%) FY18 FY19 FY20E FY21E FY22E
Net Sales 22,699 25,184 (9.9) 22,303 1.8 81,386 100,576 101,393 115,960 132,328
EBITDA 2,673 2,946 (9.2) 2,341 14.2 10,493 11,922 11,473 14,843 17,820 Naveen Trivedi
APAT 2,004 1,957 2.4 1,814 10.5 7,036 7,915 7,766 10,361 12,889 naveen.trivedi@hdfcsec.com
Diluted EPS (Rs) 3.2 3.1 2.4 2.9 10.5 11.3 12.7 12.4 16.6 20.6 +91-22-6171-7324
P/E (x) 53.3 47.4 48.3 36.2 29.1
Aditya Sane
EV / EBITDA (x) 34.4 30.5 31.6 24.1 19.6
aditya.sane@hdfcsec.com
Core RoCE (%) 33.9 26.7 21.9 27.0 32.8
Source: Company, HDFC sec Inst Research +91-22-6171-7336
HDFC securities Institutional Research is also available on Bloomberg ERH HDF <GO>& Thomson Reuters

Havells quarterly commentary
4QFY19
Industry - Industry growth in 4QFY19
was muted owing to lower
/Co
consumer demand, liquidity
Strategy
crunch, delayed summers and
lower infrastructure spend due
to impending elections
Revenue
C&W - Margins have continued to
expand and the focus remains
on improving profitability
- Increase in govt expenditure
on infrastructure can help the
industry and Havells deliver
exponential growth
- Copper prices have remained
stable and almost entire
growth delivered is a result of
volume growth
1QFY20
- The demand continues to be weak,
aggravated by real estate slow down,
liquidity squeeze and delays in projects,
post elections
- Co is working with the channel partners to
keep their cash flows healthy during the
new uptake period
- Havells was the only company, which was
more deeply distributed in smaller towns as
well. Havells has set up a separate team over
the last one-and-a-half years who are
focusing on taking product to a completely
new channel of rural distribution, which is
through superstores and retail distributors
- Co is optimistic on improvement in
economy as govt investment starts yielding
benefits.
- Industrial cable and Professional lighting
demand impacted by delay in fresh
government projects since elections
- Wires is holding steady despite housing
slowdown. Gains from unorganized
- Cables had production bottlenecks that are
behind
- Wires and Cables growth is similar no
change in pricing
- Cables will be a beneficiary of ongoing
infrastructure investment particularly in
highways and metro
- Reasonably sanguine on growth in cables
and wires in H2 as govt accelerates
economic investment in core sectors
HAVELLS INDIA: RESULTS REVIEW 3QFY20
2QFY20
- Demand outlook has continued to remain
benign
- NBFC crisis has aggravated the liquidity crunch
in the real estate market
- The overall sentiment continues to remain
weak and thus, people are delaying their
purchases
- LED Panels saw an industry-wide price decline
of 25%
- Industrial cables experienced muted growth
- Domestic wires sustained its growth level
despite the slow consumer demand
- Margin expansion has been due to a time lag
between commodity prices and the market price
- Margins will continue to remain between 15%
to 17% over the next few quarters
3QFY20
- Weak govt spending and real estate
demand kept industrial demand muted
- Co continues to focus on expanding its
rural distribution. Co has already appointed
1,800 distributors and plans to reach to
3,000 in 1 year
- Contribution from rural is expected to be
Rs 1,000-1,200mn in FY20
- B-B contributes 30% for Havells which saw
significant degrowth. B-C was flat while
retail offtake was better
- Co has witnessed improvement in
demand in the last 1 month
- Power cable degrew by 20% in volume
and 23-25% in value
- Domestic wires have grown in low single
digit
Page | 2

4QFY19
ECD - Fans growth has been in-line
with the rest of ECD but due to
an industry slowdown, it has
been faster than the industry
- Outlook in the medium to
long term is positive for
switchgears due to increased
infra spending
Switchgears
- The segment delivered
double digit growth in 4QFY19
but this was aided by a weak
base
- Demand in the Professional
segment was impacted by
Lighting
deferment in projects awaiting
political clarity
1QFY20
- Apart from Fans, there is high growth from
SDA, Water Heater, Water Purifier and Air
Coolers
- Fans growth in mid-teens (slower vs FY19)
- Established leadership in Water Heaters
- Switchgears being related to construction
have been subdued owing to realty and
project slow down
- Heavy base, slowdown, liqudiity squeeze
impacted 1Q
- Industry grew negatively since Nov-18
- Recovery will be gradual, could be
stretched out
- Professional luminaires has been
impacted by election
- Consumer luminaries have grown despite
LED price erosion. Govt lighting demand is
stabilizing. See improvement from 2Q. P
Luminaries price declines by 13-15% while
vol was up by 20%
- "Slight improvement in B2B, interest
should come back in 2H". Optimism for a
better lighting growth in the next quarter
HAVELLS INDIA: RESULTS REVIEW 3QFY20
2QFY20
- Havells reached into the top 3 market players in
the ECD category and expect to gain market
share
- Within trade, have seen an uptick in October
due to the festive season
- Have not done better than the market in Fans,
but managed to maintain market share
- Market share in most premium categories is
stable between 25-40%
- Domestic residential protection continues to do
well
- Industrial business has seen a slowdown due to
the dip in govt spending on infrastructure
- Tie up with Hyundai for development of
industrial switchgears is continuing but it is still a
WIP
- Professional luminaires has been impacted due
to the slowdown in the industrial segment
- Overall margins in the business are quite
healthy despite professional luminaires
contributing to the dip in margins
- Gained market share during 2QFY20
- REO has not led to margin contraction, and in
some categories, it has contributed to margin
expansion
3QFY20
- In Fan, co has maintained mkt share (as
per GFK). Fans usually see stocking by
dealers in Nov/Dec which has been delayed
due to liquidity issue. Thereby, fans were
flat in 3Q. Co has not witnessed
downtrading in fans.
- Delayed winter had an adverse effect on
water heaters business
- Other appliances have done well
- Switchgears Industrial performance was
tepid due to sluggish real estate demand
and curb in govt spending
- Co expects gradual recovery
- Professional lighting in commercial
segment has performed well but govt
contracts have dipped
- Growth in the B2C segments was in low
single digits
- Lighting margins continued to remain
stable
Page | 3

4QFY19
- Portfolio expansion is still
ongoing- key focus is on
bringing refrigerators
- Cost escalation could not be
passed on due to high level of
competition in the industry and
weak demand trends
- Change of efficiency ratings in
AC has acted as a disruptor in
the market
Lloyd
- After the factory is
operational, 60-65% of the
production would be in-house
- Co has been carrying more
than normal inventory as of
31st March, 2019, but
inventory levels are expected
to normalize by the end of
1QFY20
- Volume growth was flat
Margin
GM - Increase in dollar rates has put
pressure on margins is Lloyd as
the reliance on imports is high
EBITDA - Margins have been broadly
Margin stable
- Havells outspends peers 2x on
A&P expenditure in order to
establish a brand for the long
term
1QFY20
- AC offtake recovered from Q4 albeit
continued to be soft. The steep decline in
LED panels has caused overall lower sales
for Lloyd
- The loss due to low-priced channels could
not be completely compensated by gains in
mass premium outlets, which MGT hope to
improve going fwd
- RAC vol was flat in 1QFY20
- Higher cost due to increased import duty
- Brand recognition, available at leading
stores, product portfolio strengthened
- LED panels under severe stress may not
recover immediately, LED 25% mix annually.
Lower in 1Q and 4Q, New brands, Chinese
brands at low prices
- RAC Production mix 75% in FY21
- RAC channel inventory higher than mkt but
at par with last year
- Going forward there is scope for margin
enhancement as commodity and crude
remain benign
- Investing in distribution, employee, brand
salience, R&D --- these cost are now
peaking.. Op-lev coming
- Adv spend will be moderate in next 3 qtrs
vs 1Q (World Cup)
- Margin expansion coming given stable
commodity costs
HAVELLS INDIA: RESULTS REVIEW 3QFY20
2QFY20
- Mixed bag as co has seen a lot of traction from
large-format retail and regional retailers.
However, LED panels has seen a decline
- LED will be a filler business and the main focus
will remain on ACs
- TVs have seen significant market disruption
over the last few quarters, but the long term
strategy remains focused on increasing market
share
- The plant is now operational and the co has
taken significant steps in distribution realignment
which will give them far more control on the
supply chain, inventories and costs
- Witnessed mkt share loss in RAC in 1HFY20
- Refrigerators will be launched in 1QFY21
- 2HFY20 will be better than 1HFY20. Expecting to
see some growth over 2H
- Supply chain decisions will be reflected in
revenues and margins 1QFY21 onwards
- Contribution margins for Havells have been
sustained despite the sluggish sales
- Lloyd factory being operational will contribute to
margin expansion
- Margins will definitely be better in 2HFY20 vs.
1HFY20
- Strong steps have been taken to reduce non-
essential costs, but the results will be visible from
4QFY20 onwards
- Focus is on improving profitability through better
pricing and cost control
3QFY20
- TV Panels continued to struggle but AC
has done well
- Level of automation in the new plant will
help going forward
- Majority of the corrective steps to control
the supply chain have been taken
- Expecting traction in AC to be better in Q4
- The co has seen positive movement in AC
mkt share. Distributors remain confident
about recovery
- WM range will be expanded and Ref will
be launched from 1QFY21
- Will not focus just on premium in Ref. The
range of products will be complete
- 6-8% margin can be achieved in Lloyd
over the medium to long term
- Margins for Havells have been sustained
despite the sluggish sales
- Lloyd factory being operational will
contribute to margin expansion
- MGT is tightening the belt on non-
essential costs, results will be visible from
4QFY20 onwards
- Focus is on improving profitability through
better pricing and cost control
- Core business has favourable base
- Lloyd margin will improve in FY21, 6-8%
margin can be achieved
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 HAVELLS INDIA: RESULTS REVIEW 3QFY20

Quarterly Financials
Switchgears/C&W/lighting/Llo Year to March (Rs mn) 3Q FY20 3Q FY19 YoY (%) 2Q FY20 QoQ (%) 9MFY20 9MFY19 YoY (%)
yd posted weak -6/-13/-8/-16%
Net Revenue 22,699 25,184 (9.9) 22,303 1.8 72,122 73,058 (1.3)
growth, while ECD reported flat
Material Expenses 13,766 15,751 (12.6) 13,580 1.4 44,334 45,477 (2.5)
revenues
Employee Expenses 2,194 2,108 4.1 2,395 (8.4) 7,001 6,111 14.6
ASP Expenses 773 915 (15.5) 742 4.2 2,885 2,813 2.6
Other Operating Expenses 3,293 3,465 (5.0) 3,246 1.4 10,130 9,963 1.7
Material expenses declined by
EBITDA 2,673 2,946 (9.2) 2,341 14.2 7,771 8,694 (10.6)
13% as a result of weakness in
Depreciation 552 353 56.3 531 3.9 1,552 1,095 41.7
commodity prices. ASP expense EBIT 2,122 2,593 (18.2) 1,810 17.2 7,148 8,565 (16.5)
declined by 16%. Co continues Other Income 240 331 (27.4) 292 (17.9) 929 966 (3.8)
to focus on cost rationalization Interest Cost 53 36 47.8 51 2.3 151 98 54.8
PBT 2,309 2,888 (20.0) 2,051 12.6 6,997 8,467 (17.4)
Weakness in industrial demand Exceptional item - - na - na - - na
impacted revenues PBT after exceptional 2,309 2,888 (20.0) 2,051 6,997 8,467 (17.4)
Tax 305 931 (67.2) 237 28.7 1,440 2,620 (45.0)
RPAT 2,004 1,957 2.4 1,814 10.5 5,557 5,847 (5.0)
Lower corp tax resulted in 2% Exceptional (net of taxes) - - na - na - - na
growth in APAT APAT 2,004 1,957 2.4 1,814 10.5 5,557 5,847 (5.0)
EPS (adjusted) 3.2 3.1 2.4 2.9 10.5 8.9 9.4 (5.0)
Source: Company, HDFC sec Inst Research

Margin Analysis
MARGIN ANALYSIS 3Q FY20 3Q FY19 YoY (%) 2Q FY20 QoQ (%) 9MFY20 9MFY19 YoY (%)
Material Expenses 60.6 62.5 (190) 60.9 (24) 61.5 62.2 (78)
Employee Expenses 9.7 8.4 130 10.7 (107) 9.7 8.4 134
ASP Expenses 3.4 3.6 (23) 3.3 8 4.0 3.8 15
Other Operating Expenses 14.5 13.8 75 14.6 (5) 14.0 13.6 41
EBITDA Margin (%) 11.8 11.7 8 10.5 128 10.8 11.9 (112)
Tax Rate (%) 13.2 32.2 (1,903) 11.6 166 20.6 30.9 (1,036)
APAT Margin (%) 8.8 7.8 106 8.1 70 7.7 8.0 (30)
Source: Company, HDFC sec Inst Research

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 HAVELLS INDIA: RESULTS REVIEW 3QFY20

Segmental Quarterly Performance

(Rs mn) 3Q FY20 3Q FY19 YoY (%) 2Q FY20 QoQ (%) 9MFY20 9MFY19 YoY (%)
Low stocking by channel in fans
Segmental Revenues
(liquidity issue) and delayed
Cables and Wires 7,121 8,203 (13.2) 8,213 (13.3) 23,119 23,367 28.0
winter were the key factors for
Consumer Durables 5,814 5,785 0.5 5,506 5.6 17,555 15,630 39.0
muted ECD. Switch Gears 3,713 3,929 (5.5) 3,977 (6.6) 11,465 11,693 25.0
Lighting & Fixtures 2,946 3,189 (7.6) 2,691 9.5 8,349 8,618 20.0
Lloyd Consumer Division 3,004 3,572 (15.9) 1,800 67.0 11,324 13,232 2.0
Co will enjoy favourable base Others 100 506 (80.2) 117 na 310 516 (39.9)
over the next 4 quarters and is Total 22,699 25,184 (9.9) 22,303 1.8 72,122 73,056 31.0
at the start of an upcycle Segmental Contribution
Cables and Wires 1,248 1,294 (3.6) 1,510 (17.4) 4,049 3,643 11.1
Consumer Durables 1,496 1,412 5.9 1,383 8.1 4,611 4,122 11.9
Switch Gears 1,479 1,631 (9.3) 1,589 (6.9) 4,559 4,715 (3.3)
Lighting & Fixtures 867 960 (9.7) 775 11.8 2,415 2,517 (4.1)
Lloyd Consumer Division 236 531 (55.6) (42) (666.6) 1,243 2,378 (47.7)
Others 27 129 (79.1) 41 na 107 130 (17.7)
Total 5,353 5,957 (10.1) 5,257 1.8 16,983 17,504 (3.0)
Less:
(a) Interest Cost & Bank Charges 53 36 47.8 51 2.3 151 98 54.8
(b) Other Un-allocable Expenses 2,991 3,033 (1.4) 3,114 (3.9) 9,786 8,939 9.5
PBT 2,309 2,888 (20.1) 2,092 10.4 7,046 8,467 (16.8)
Capital Employed
Cables and Wires 4,536 3,355 35.2 4,593 (1.2) 4,536 3,355 35
Consumer Durables 4,271 2,274 87.8 4,352 (1.9) 4,271 2,274 88
Switch Gears 3,840 3,588 7.0 4,420 (13.1) 3,840 3,588 7
Lighting & Fixtures 2,944 3,012 (2.2) 3,265 (9.8) 2,944 3,012 (2)
Lloyd Consumer Division 21,993 22,037 (0.2) 22,239 (1.1) 21,993 22,037 (0)
Total 37,584 34,266 9.7 38,869 (26.0) 37,584 34,266 9.7
Unallocable Capital Employed 7,205 6,118 17.8 9,953 (27.6) 7,205 6,118 17.8
Total Capital Employed 44,789 40,384 10.9 48,822 (8.3) 44,789 40,384 10.9
Source: Company, HDFC sec Inst Research
Note: Contribution margins are derived after deducting material cost, manufacturing variables, direct selling variables and depreciation
from the net revenue| *Lloyd’s growth in FY19 is based on comparable growth

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 HAVELLS INDIA: RESULTS REVIEW 3QFY20

Contribution margins for Segmental Contribution Margin

ECD/C&W saw an increase, Contribution Margin (%) 3Q FY20 3Q FY19 YoY (bps) 2Q FY20 QoQ (bps) 9MFY20 9MFY19 YoY (bps)
while Cables and Wires 17.5 15.8 174 18.4 (87) 17.5 15.6 192
Lighting/Switchgear/Lloyd Consumer Durables 25.7 24.4 132 25.1 60 26.3 26.4 (10)
declined by 67/167/700bps. Switch Gears 39.8 41.5 (167) 39.9 (10) 39.8 40.3 (56)
Lighting & Fixtures 29.4 30.1 (67) 28.8 61 28.9 29.2 (28)
Lloyd Consumer Division 7.8 14.9 (702) (2.3) 1,016 11.0 18.0 (699)
Total 23.6 23.7 (7) 23.6 1 23.5 24.0 (41)
Source: Company, HDFC sec Inst Research

Page | 7
 HAVELLS INDIA: RESULTS REVIEW 3QFY20

Segmental Analysis and Segmental Assumption

Cable & Wires 4Q FY18 1Q FY19 2Q FY19 3Q FY19 4Q FY19 1Q FY20 2Q FY20 3Q FY20 FY19 FY20E FY21E FY22E
Sales (Rs mn) 7,689 7,499 7,665 8,203 8,979 7,785 8,213 7,121 32,346 32,457 36,955 41,759
Sales Gr. (%) 13.0 18.0 34.6 31.1 16.8 3.8 7.2 (13.2) 24.0 0.3 13.9 13.0
Sales Mix (%) 30.3 28.9 35.0 32.6 32.6 28.7 36.8 31.4 32.2 32.0 31.9 31.6
Contribution Gr. (%) 13.0 18.0 34.6 31.1 16.8 3.8 7.2 (13.2) 19.1 9.7 14.2 13.0
Contribution Margin (%) 17.1 17.0 14.0 15.8 17.5 16.6 18.4 17.5 16.1 17.6 17.7 17.7
Contribution Margin
423bps 355bps -594bps -133bps 40bps -47bps 442bps 174bps -72bps 150bps 5bps 0bps
Chg
Contribution Mix (%) 20.6 20.4 20.3 21.7 24.6 20.3 28.7 23.3 21.8 24.0 23.3 22.8

Consumer Durable 4Q FY18 1Q FY19 2Q FY19 3Q FY19 4Q FY19 1Q FY20 2Q FY20 3Q FY20 FY19 FY20E FY21E FY22E
Sales (Rs mn) 4,646 5,040 4,805 5,785 5,049 6,235 5,506 5,814 20,679 23,210 27,028 31,622
Sales Gr. (%) 29.0 43.0 49.5 39.1 8.7 23.7 14.6 0.5 30.0 12.2 16.5 17.0
Liquidity constrains in trade Sales Mix (%) 18.3 19.4 21.9 23.0 18.3 23.0 24.7 25.6 20.6 22.9 23.3 23.9
channels led to a dip in stocking Contribution Gr. (%) 32.6 74.4 44.0 14.8 4.7 21.7 7.5 5.9 29.5 13.2 19.1 17.6
of fans which typically happens Contribution Margin (%) 27.2 28.2 26.8 24.4 26.2 27.8 25.1 25.7 26.3 26.5 27.1 27.3
in Nov/Dec Contribution Margin Chg 269bps 546bps -102bps -517bps -100bps -46bps -166bps 132bps -61bps 23bps 59bps 15bps
Contribution Mix (%) 19.8 22.7 24.4 23.7 20.6 27.2 26.3 27.9 22.8 25.8 26.1 26.6

4Q
Switchgears 1Q FY19 2Q FY19 3Q FY19 4Q FY19 1Q FY20 2Q FY20 3Q FY20 FY19 FY20E FY21E FY22E
FY18
Sales (Rs mn) 3,946 3,758 4,006 3,929 4,368 3,775 3,977 3,713 16,060 16,008 18,048 20,214
Sales Gr. (%) 12.0 26.0 21.4 14.1 10.7 0.5 (0.7) (5.5) 21.0 (0.3) 12.7 12.0
Sales Mix (%) 15.6 14.5 18.3 15.6 15.9 13.9 17.8 16.4 16.0 15.8 15.6 15.3
Contribution Gr. (%) 5.7 14.2 16.7 18.2 8.8 (0.1) (0.1) (9.3) 14.3 (1.2) 13.5 12.3
Contribution Margin (%) 38.6 39.7 39.7 41.5 37.9 39.5 39.9 39.8 39.7 39.3 39.6 39.7
Contribution Margin Chg 20bps 116bps -160bps 144bps -67bps -23bps 23bps -167bps 9bps -33bps 26bps 10bps
Note: *Like-to-like revenue growth 2QFY18-1QFY19

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 HAVELLS INDIA: RESULTS REVIEW 3QFY20

Lighting & Fixtures 4Q FY18 1Q FY19 2Q FY19 3Q FY19 4Q FY19 1Q FY20 2Q FY20 3Q FY20 FY19 FY20E FY21E FY22E
Lighting & fixtures margins Sales (Rs mn) 3,068 2,573 2,856 3,189 3,296 2,712 2,691 2,946 11,914 11,809 13,349 15,084
Sales Gr. (%)* 20.0 25.0 18.0 18.1 7.4 5.4 (5.8) (7.6) 16.0 (0.9) 13.0 13.0
remained stable but dip in govt
Sales Mix (%) 12.1 9.9 13.0 12.7 12.0 10.0 12.1 13.0 11.8 11.6 11.5 11.4
spending affected performance.
Contribution Gr. (%) 34.2 14.3 13.7 24.2 (9.7) 8.7 (8.4) (9.7) 9.1 0.8 13.9 13.4
B2C segment saw single digit Contribution Margin (%) 32.0 27.6 29.6 30.1 26.9 28.5 28.8 29.4 28.6 29.1 29.3 29.4
growth Contribution Margin Chg 471bps -265bps -115bps 147bps -509bps 87bps -83bps -67bps -191bps 50bps 22bps 10bps
Contribution Mix (%) 15.4 11.3 16.1 16.1 13.9 12.1 14.8 16.2 14.2 14.4 13.9 13.7

Lloyd 4Q FY18 1Q FY19 2Q FY19 3Q FY19 4Q FY19 1Q FY20 2Q FY20 3Q FY20 FY19 FY20E FY21E FY22E
Lloyd revenues were down by Sales (Rs mn) 5,841 7,081 2,579 3,572 5,324 6,520 1,800 3,004 18,556 17,071 19,632 22,577
Sales Gr. (%) - 14.0 (4.4) 21.9 (8.9) (7.9) (30.2) (15.9) 6.4 (8.0) 15.0 15.0
16% (in-line) owing to sharp fall
Sales Mix (%) 23.0 27.3 11.8 14.2 19.3 24.0 8.1 13.2 18.4 16.8 16.9 17.1
in TV Panels. AC has recovered
Contribution Gr. (%) na 247.8 (9.6) 10.7 (37.8) (23.4) (108.7) (55.6) 18.3 (37.3) 46.7 26.6
in 3Q and expect to do well in Contribution Margin (%) 22.0 19.4 18.5 14.9 15.0 16.1 (2.3) 7.8 17.1 11.7 14.9 16.4
the upcoming season. Contribution Margin Chg 0 461bps -106bps -151bps -698bps -326bps -2,078bps -702bps -187bps -545bps 321bps 150bps
Contribution Mix (%) 20.1 21.8 9.0 8.9 12.5 16.5 (0.8) 4.4 13.3 8.3 10.4 11.4
Havells has taken multiple Note: *Like-to-like revenue growth 2QFY18-1QFY19
corrective measures in Lloyd
which are expected to pay off
4Q onwards

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 HAVELLS INDIA: RESULTS REVIEW 3QFY20

With focus on new launches Havells Progress: Key focus areas are manufacturing, R&D, distribution and talent
and market share gains, co has
taken a significant leap in FY19
on (1) R&D (Rs 790mn), (2)
Employee strength (expense up
28% YoY) and (3) A&P spend
(up +25% YoY). We believe
these costs are peaking (% of
sales) and hence expect margin
expansion led by operating
leverage

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 HAVELLS INDIA: RESULTS REVIEW 3QFY20

Havells has gained market Havells Market Share

Market Size Havells' Mkt Organized
share in switches (+150bps Segments Rank Peers
(Rs bn) Share (%) Penetration
YoY), lighting (+200bps YoY), Switchgears - MCB 22 27-28 1 High Legrand, Schneider
fans (+300bps YoY), water Switchgears - Switches 22 16 3 Medium Panasonic (Anchor), Legrand
heater (+400bps YoY) and other Cable - Domestic 80 16 3 Low Finolex, Polycab
appliances (+250bps YoY) Cable - Industrial 120 10 3 Medium Polycab, KEI
Lighting & Fixtures 65 12-15 2-4 Medium Philips, Crompton, Bajaj, Wipro
Havells has maintained its Fans 69 19 3 High Crompton, Orient, Usha
market share in switchgears Water Heater 14 19 3 Low Racold, AO Smith
and cables Other Appliances 50 5-6 na Low Bajaj, Philips
Source: Company, HDFC sec Inst Research

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 HAVELLS INDIA: RESULTS REVIEW 3QFY20

Havells Core Business Assumption

Cable & Wires FY17 FY18* FY19 FY20E FY21E FY22E
Sales (Rs mn) 23,793 26,001 32,346 32,457 36,955 41,759
Sales Gr. (%) 8.8 9.3 24.0 0.3 13.9 13.0
Sales Mix (%) 38.8 31.9 32.2 32.0 31.9 31.6
Contribution Gr. (%) 5.1 34.5 19.1 9.7 14.2 13.0
Contribution Margin (%) 13.7 16.8 16.1 17.6 17.7 17.7
Contribution Margin Chg -49bps 316bps -72bps 150bps 5bps 0bps
Contribution Mix (%) 21.7 21.7 21.8 24.0 23.3 22.8

Elec. Consumer Durable FY17 FY18* FY19 FY20E FY21E FY22E

Sales (Rs mn) 13,783 15,602 20,679 23,210 27,028 31,622
Sales Gr. (%) 22.4 21.0 30.0 12.2 16.5 17.0
Sales Mix (%) 22.5 19.2 20.6 22.9 23.3 23.9
Contribution Gr. (%) 21.8 20.3 29.5 13.2 19.1 17.6
Contribution Margin (%) 25.3 26.9 26.3 26.5 27.1 27.3
Contribution Margin Chg -12bps 158bps -61bps 23bps 59bps 15bps
Contribution Mix (%) 23.3 20.8 22.8 25.8 26.1 26.6

Switchgears FY17 FY18* FY19 FY20E FY21E FY22E

Sales (Rs mn) 14,065 14,077 16,060 16,008 18,048 20,214
Sales Gr. (%) 10.5 7.0 21.0 (0.3) 12.7 12.0
Sales Mix (%) 22.9 17.3 16.0 15.8 15.6 15.3
Contribution Gr. (%) 11.7 (0.7) 14.3 (1.2) 13.5 12.3
Contribution Margin (%) 39.9 39.6 39.7 39.3 39.6 39.7
Contribution Margin Chg 43bps -30bps 9bps -33bps 26bps 10bps
Contribution Mix (%) 37.4 27.6 26.7 26.4 25.4 24.7

Lighting FY17 FY18* FY19 FY20E FY21E FY22E

Sales (Rs mn) 9,720 10,240 11,914 11,809 13,349 15,084
Sales Gr. (%) 22.6 12.8 16.0 (0.9) 13.0 13.0
Sales Mix (%) 15.8 12.6 11.8 11.6 11.5 11.4
Contribution Gr. (%) 38.3 17.7 9.1 0.8 13.9 13.4
Contribution Margin (%) 27.3 30.5 28.6 29.1 29.3 29.4
Contribution Margin Chg 310bps 320bps -191bps 50bps 22bps 10bps
Contribution Mix (%) 17.7 15.5 14.2 14.4 13.9 13.7
Source: Company, HDFC sec Inst Research
* YoY revenue growth is like-to-like adjusted for GST

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 HAVELLS INDIA: RESULTS REVIEW 3QFY20

We are optimistic for core Estimate Change

business to bounce back in FY20E FY21E FY22E
2HFY20 but remain cautious for New Old Chg (%) New Old Chg (%) New Old Chg (%)
Lloyd’s recovery in FY20 (non- Sales 101,393 106,299 (4.6) 115,960 121,418 (4.5) 132,328 138,617 (4.5)
seasonal) EBITDA 11,473 12,047 (4.8) 14,843 15,511 (4.3) 17,820 18,569 (4.0)
PAT 7,766 8,405 (7.6) 10,361 11,058 (6.3) 12,889 13,610 (5.3)
Our FY20E EPS cut is primarily EPS 12.4 13.4 (7.6) 16.6 17.7 (6.3) 20.6 21.8 (5.3)
driven by miss in Lloyd’s
performance (revenue and Peer Set Comparison
margins) MCap EPS (Rs) P/E (x) EV/EBITDA (x) Core RoCE (%)
CMP TP
Company (Rs Reco.
(Rs) (Rs) FY19 FY20E FY21E FY19 FY20E FY21E FY19 FY20E FY21E FY19 FY20E FY21E
bn)
Havells 375 600 BUY 710 12.4 16.6 20.6 48.3 36.2 29.1 31.6 24.1 19.6 21.9 27.0 32.8
Voltas 230 695 BUY 740 19.5 23.5 27.7 35.7 29.6 25.1 26.7 22.9 19.4 29.3 30.4 31.0
Crompton 164 261 BUY 339 7.6 8.9 10.0 34.4 29.4 26.2 25.0 21.5 19.1 45.4 51.1 55.3
V-Guard 96 225 NEU 233 5.0 6.1 7.2 44.7 36.8 31.4 31.9 27.5 23.6 26.2 28.2 29.9
Symphony 84 1,197 BUY 1,863 28.1 35.5 42.9 42.7 33.7 27.9 33.3 26.0 21.2 47.7 56.4 63.8
TTK Prestige 83 5,984 NR 8,307 165.9 187.8 214.2 36.1 31.9 27.9 25.4 22.0 19.0 23.6 24.3 26.2
Source: HDFC sec Inst Research

Page | 13
 HAVELLS INDIA: RESULTS REVIEW 3QFY20

Income Statement Balance Sheet

(Rs mn) FY18 FY19 FY20E FY21E FY22E (Rs mn) FY18 FY19 FY20E FY21E FY22E
Net Revenues 81,386 100,576 101,393 115,960 132,328 SOURCES OF FUNDS
Growth (%) 37.0 23.6 0.8 14.4 14.1 Share Capital - Equity 625 626 626 626 626
Material Expenses 49,808 62,786 62,483 70,823 80,304 Reserves 36,766 41,800 46,273 52,243 59,278
Employee Expense 6,497 8,324 9,436 10,379 11,417 Total Shareholders' Funds 37,392 42,425 46,898 52,869 59,903
ASP Expense 3,076 3,842 3,909 4,233 4,797 Long Term Debt 810 405 205 105 5
Distribution Expense 2,717 3,422 3,552 4,178 4,900 Short Term Debt 270 540 540 540 540
Other Expenses 8,795 10,280 10,541 11,503 13,090 Total Debt 1,080 945 745 645 545
EBITDA 10,493 11,922 11,473 14,843 17,820 Net Deferred Taxes 2,070 3,217 3,217 3,217 3,217
EBITDA Growth (%) 27.3 13.6 (3.8) 29.4 20.1 Other Non Current Liabilities 471 536 536 536 536
EBITDA Margin (%) 12.9 11.9 11.3 12.8 13.5 TOTAL SOURCES OF FUNDS 41,012 47,123 51,396 57,267 64,201
Depreciation 1,395 1,486 2,054 2,334 2,474 APPLICATION OF FUNDS
EBIT 9,098 10,436 9,419 12,509 15,346 Net Block 13,017 14,306 18,752 20,417 19,943
Other Income (Inc. EO Items) 1,289 1,276 1,145 1,495 2,016 Goodwill 14,835 14,707 15,200 15,200 15,200
Interest 240 159 186 157 138 CWIP 366 2,553 1,392 812 812
PBT 10,147 11,553 10,378 13,847 17,224 Non Current Investments 417 583 583 583 583
Total Tax 3,022 3,637 2,612 3,485 4,335 LT Loans & Advances 276 445 356 356 356
RPAT 7,125 7,915 7,766 10,361 12,889 Other Non Current Assets 176 1,088 912 912 912
Adjusted PAT 7,036 7,915 7,766 10,361 12,889 Total Non-current Assets 29,087 33,682 37,194 38,280 37,805
APAT Growth (%) 17.9 12.5 (1.9) 33.4 24.4 Inventories 16,217 19,170 19,445 22,239 25,378
Adjusted EPS (Rs) 11.3 12.7 12.4 16.6 20.6 Debtors 3,254 4,048 4,081 4,667 5,326
EPS Growth (%) 17.9 12.4 (1.9) 33.4 24.4 Other Current Assets 1,432 1,864 1,876 2,090 2,330
Source: Company, HDFC sec Inst Research Cash & Equivalents 15,262 12,848 13,826 18,632 26,048
Total Current Assets 36,164 37,930 39,228 47,627 59,081
Creditors 16,340 15,594 15,556 17,791 20,302
Other Current Liabilities & Provns. 7,899 8,895 9,470 10,849 12,383
Total Current Liabilities 24,239 24,489 25,027 28,640 32,685
Net Current Assets 11,925 13,442 14,202 18,987 26,396
TOTAL APPLICATION OF FUNDS 41,012 47,123 51,396 57,267 64,201
Source: Company, HDFC sec Inst Research

Page | 14
 HAVELLS INDIA: RESULTS REVIEW 3QFY20

Cash Flow Statement Key Ratios

(Rs mn) FY18 FY19 FY20E FY21E FY22E FY18 FY19 FY20E FY21E FY22E
Reported PBT 10,028 11,553 10,378 13,847 17,224 PROFITABILITY (%)
Non-operating & EO Items (204) (43) - - - GPM 38.8 37.6 38.4 38.9 39.3
Interest Expenses (249) (650) (186) (157) (138) EBITDA Margin 12.9 11.9 11.3 12.8 13.5
Depreciation 1,395 1,486 2,054 2,334 2,474 EBIT Margin 11.2 10.4 9.3 10.8 11.6
Working Capital Change 2,556 (4,752) (396) (476) (523) APAT Margin 8.8 7.9 7.7 8.9 9.7
Tax Paid (2,450) (2,468) (2,612) (3,485) (4,335) RoE 20.1 19.8 17.4 20.8 22.9
OPERATING CASH FLOW ( a ) 11,077 5,125 9,240 12,063 14,702 RoIC (or Core RoCE) 33.9 26.7 21.9 27.0 32.8
Capex (15,888) (5,009) (5,832) (3,420) (2,000) RoCE 18.7 18.2 16.0 19.3 21.4
Free Cash Flow (FCF) (4,811) 117 3,408 8,643 12,702 EFFICIENCY
Investments 5,028 6,002 (658) (500) (500) Tax Rate (%) 30.1 31.5 25.2 25.2 25.2
Non-operating Income 843 788 (176) - - Fixed Asset Turnover (x) 4.1 4.4 3.5 3.5 3.7
INVESTING CASH FLOW ( b ) (10,017) 1,782 (6,667) (3,920) (2,500) Inventory (days) 72.7 69.6 70.0 70.0 70.0
Debt Issuance/(Repaid) (901) (135) 142 303 338 Debtors (days) 14.6 14.7 14.7 14.7 14.7
Interest Expenses (197) (132) 186 157 138 Other Current Assets (days) 6.4 6.8 6.8 6.6 6.4
FCFE (5,514) 114 3,364 8,789 12,901 Payables (days) 73.3 56.6 56.0 56.0 56.0
Share Capital Issuance 147 180 1,098 1,464 1,464 Other Current Liab & Provns (days) 36.2 32.9 34.1 34.1 34.2
Dividend (2,632) (3,016) (4,391) (5,854) (7,318) Cash Conversion Cycle (days) (15.7) 1.5 1.4 1.1 1.0
Others - - - - - Net D/E (x) (0.4) (0.3) (0.3) (0.3) (0.4)
FINANCING CASH FLOW ( c ) (3,583) (3,103) (2,966) (3,931) (5,379) Interest Coverage (x) 42.8 73.6 56.9 89.2 125.8
NET CASH FLOW (a+b+c) (2,523) 3,803 (393) 4,212 6,823 PER SHARE DATA (Rs)
EO Items, Others 12,236 (34) - - - EPS 11.3 12.7 12.4 16.6 20.6
Closing Cash & Equivalents 3,026 12,883 13,326 17,632 24,548 CEPS 13.5 15.0 15.7 20.3 24.6
Source: Company, HDFC sec Inst Research Dividend 4.0 4.5 6.0 8.0 10.0
Book Value 59.8 67.8 75.0 84.5 95.8
VALUATION
P/E (x) 53.3 47.4 48.3 36.2 29.1
P/BV (x) 10.0 8.8 8.0 7.1 6.3
EV/EBITDA (x) 34.4 30.5 31.6 24.1 19.6
EV/Revenues (x) 4.4 3.6 3.6 3.1 2.6
OCF/EV (%) 3.1 1.4 2.6 3.4 4.2
FCF/EV (%) (1.3) 0.0 0.9 2.4 3.6
FCFE/Mkt Cap (%) (1.4) 0.1 1.2 2.7 3.8
Dividend Yield (%) 0.7 0.8 1.0 1.3 1.7
Source: Company, HDFC sec Inst Research

Page | 15
 HAVELLS INDIA: RESULTS REVIEW 3QFY20

RECOMMENDATION HISTORY
Date CMP Reco Target
Havells TP 9-Jan-19 670 NEU 713
800 22-Jan-19 711 NEU 738
10-Apr-19 761 NEU 773
750 30-May-19 733 NEU 743
4-Jun-19 770 NEU 743
700 9-Jul-19 739 NEU 732
29-Jul-19 666 NEU 694
22-Sep-19 729 NEU 764
650
11-Oct-19 656 BUY 766
25-Oct-19 669 BUY 730
600 9-Jan-20 639 BUY 745
22-Jan-20 600 BUY 710
550
Rating Definitions
Aug-19
Apr-19
Jan-19

Jan-20
Feb-19

Jul-19

Sep-19

Nov-19
Jun-19
May-19

Dec-19
Mar-19

Oct-19

BUY : Where the stock is expected to deliver more than 10% returns over the next 12 month period
NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period
SELL : Where the stock is expected to deliver less than (-)10% returns over the next 12 month period

HDFC securities
Institutional Equities
Unit No. 1602, 16th Floor, Tower A, Peninsula Business Park,
Senapati Bapat Marg, Lower Parel,Mumbai - 400 013
Board : +91-22-6171 7330 www.hdfcsec.com

Page | 16
 HAVELLS INDIA: RESULTS REVIEW 3QFY20

Disclosure:
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