Havells investors focus on cables, Lloyd's path to profitability

livemint.com:

Havells India Ltd had a challenging December quarter (Q3FY24), owing to weak consumer demand. Sales growth was sluggish across most businesses. Investors are primarily concerned about the capacity challenges in the cables segment and the prolonged journey towards profitability for Lloyd Consumer.

Havells' current investment in cables and wires is sub-optimal in scale, especially considering the current surge in demand, said Alok Deshpande, executive director at Nuvama Institutional Equities. This situation may lead to Havells potentially losing more market share to competitors such as Polycab or KEI Industries, he added. In its Q3 earnings call, Havells said that its underground cables capacity will rise by 25% after the commissioning of its new plant in Karnataka.

Additionally, the company is expanding its domestic wires’ capacity. Meanwhile, the Lloyd Consumer business continues to report operating losses despite clocking 7% revenue growth in Q3. While Lloyds has a huge market potential, margin improvement in the medium term is expected to be slow.

The management refrained from predicting breakeven margins for Lloyd in the near term. Other segments also faced challenges. The switchgear division saw lower sales in the telecom original equipment maker category and flat exports.

The lighting business grappled with price deflation issues. The electrical consumer durables business (ECD) saw a muted 3% growth due to subdued demand and a higher base in the fans category. While the management said it is witnessing some green shoots in B2C demand, it does not foresee price hikes in the ECD segment in the next couple of quarters.