Havells can make a mark in kitchen appliances, but slowly

For FY23, Havells clocked consolidated revenue of  ₹16,910 crore. Mint
For FY23, Havells clocked consolidated revenue of 16,910 crore. Mint


Considering a potential market share of 7-8% in the organized space, a new product category would add revenue of 1,000 crore over the next three to four years.

Havells India Ltd is expanding its wings a little bit more. Currently, it is present in categories such as switchgears, cables, lighting and air conditioners. It now plans to introduce kitchen appliances such as cooktops, hobs, chimneys and other built-in appliances in its portfolio. These products are expected to be launched in May.

Havells expects this move to bring synergies with its current line-up of small domestic appliances such as hair dryers, toasters and hand blenders. The complete product range will be outsourced to cater to the domestic market. Over a period of time, this should fetch additional revenue, though it would be a gradual process.

The market size of kitchen appliances is about 20,000-25,000 crore and organized players account for typically 60-65% of the market, said Achal Lohade, analyst at JM Financial Institutional Securities.

Considering a potential market share of 7-8% in the organized space, a new product category would add revenue of 1,000 crore over the next three to four years, Lohade added. For FY23, Havells clocked consolidated revenue of 16,910 crore.

Havells aims to be among the top three market players in the next three years from the start of operations.

CLSA notes that if Havells achieves a 10% market share in kitchen appliances, it could result in a value increase of 45-70 per share. But kitchen appliances segment is highly competitive with the presence of companies such as TTK Prestige Ltd and Butterfly Gandhimathi Appliances Ltd.

Moreover, Havells’ entry into new product segments such as mixers introduced in 2014 has faced scaling challenges, notes Lohade. This is despite Havells’ strong brand name. As such expanding the distribution network could aid in successfully scaling both existing and new products.

Meanwhile, consumer demand remains subdued and that’s a concern for Havells since business-to-consumer forms the larger portion of its overall sales mix.

Dolat Capital Market’s analysts recently met the management of Havells where it said that the business-to-consumer demand was moderate in January and February. It did not resort to price increases as commodity costs were stable. Further, no price revision is expected during the summer season.

The cables business, which formed over 34% of Havells’ consolidated revenue in the nine-month period ending December, saw relatively better demand trends versus others. This was mainly led by the healthy housing and infrastructure demand. But here capacity constraints are a challenge for Havells and the new cables and wires facility in Karnataka could bring some comfort. This facility is expected to start operations in early FY25 and would expand the capacity by 25%.

The lighting and switchgear segments are likely to see a dull March quarter (Q4FY24). Havells noted that price deflation would impact lighting while the switchgear segment would be hurt due to slow real estate demand and a high base. Moreover, the Lloyd consumer segment brand continues to make losses.

With the summer season on the anvil, the volume trajectory of air conditioners remains to be seen amid competition. Air conditioners form the largest part of Lloyd’s revenue, but it also includes other appliances such as washing machines and refrigerators.

Overall, Dolat expects Havells to clock low double-digit revenue growth led by volume in Q4. March is a key monitorable for summer sales.

Improving profitability in the Lloyd segment could provide further boost to the stock, which has risen about 26% in the past one year.

Investors should keep a close eye on demand recovery, and a flow-through of deferred purchases in business–to-consumer categories. For now, valuations are pricey. Havells’ shares trade at 59 times FY25 estimated earnings, showed Bloomberg data.

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