Havells, Voltas trip on valuations
Havells India Ltd and Voltas Ltd’s air conditioner segments put up a good show on the revenue front in the September quarter (Q2FY24). Havells’ Lloyd and Voltas’ unitary cooling products (UCP) segments clocked year-on-year revenue growth of about 19% and 15% in Q2, respectively.Lloyd segment also includes other products such as refrigerators and washing machines. But investors are not impressed.
Shares of Havells and Voltas have fallen by about 7% and 3%, respectively, after results. The muted response is understandable. For one, the margin performance was nothing to write home about.
Voltas’ UCP segment witnessed just 40 basis points margin expansion year-on-year, and Lloyd continued to be in the red. However, Lloyd’s air conditioner market share is inching up, implying that the gain is at the cost of profitability. On the other hand, Voltas’ market share dropped to 19.5% in August from 20.6% in June.
Moreover, margin pressures continue to linger considering the intensifying competition. In fact, Q2 results have triggered analysts to cut earnings estimates for FY24. The pressing worry in both the companies, which led to earnings cuts, emanates from their other segments.
In the case of Havells, the cables and wires business was impacted by capacity constraints. The segment’s revenue growth of 8% year-on-year lagged expectations. In comparison, Polycab India Ltd’s wires & cables revenue growth stood at 29%.
As such, the near-term outlook for Havells’ cables and wires business is not particularly encouraging. The new facility for cables is expected to be commissioned only by early FY25, which would enhance capacity by about 25%. “Havells has clearly lost market share in cables over the recent quarters, suggesting a lack of
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