Havells Q1 margin hit by ad spend, outlook hinges on price hikes
Havells India's 20% revenue jump in the June quarter was overshadowed by a sharp margin decline, prompting mixed analyst reactions as investors weigh whether planned price increases can restore profitability at its current rich valuation.
Havells India reported a near 20% year-on-year increase in June quarter revenue to ₹6,518 crore, but underlying profitability deteriorated significantly. Earnings before interest, taxes, depreciation and amortization margins fell by 230 basis points to 7.2%. The decline was driven by a doubling of advertising and sales promotion expenses to ₹286 crore as the company frontloaded brand-building efforts.
Management expects this marketing spend to normalize to 2.7%-2.8% of revenue for FY27, in line with its long-term average. Total advertising and promotional costs stood at roughly ₹600 crore in the entirety of FY26. To combat raw material inflation, Havells has also implemented staggered price hikes averaging 7% to 8%, with some high copper and aluminium categories seeing increases of up to 20%.
The price increases were particularly evident in the cables division, where revenue jumped 27% to ₹2,455 crore. A newly carved-out renewables segment posted a 236% surge to ₹314 crore, driven by solar product demand. However, these gains were partially offset by a 4% drop in switchgear revenue due to export disruptions from the conflict in West Asia.
The company's Lloyd appliances division grew revenue by 15% but remained loss-making. Management attributed the ongoing losses to a delayed onset of summer, channel inventory normalization and the elevated advertising spend.
The margin pressure has divided analyst sentiment. Nuvama Research expects strong double-digit revenue and Ebitda growth in the subsequent two quarters as the impact of a distribution strategy transition fades, and has broadly maintained its estimates. Conversely, Motilal Oswal Financial Services cut its FY27 and FY28 Ebitda estimates by roughly 6% and 8%, respectively, resulting in an 8% to 10% reduction in earnings per share projections.
The mixed outlook has weighed heavily on the stock, which is down approximately 16% so far in 2026. Shares currently trade at 43 times estimated FY27 earnings, a premium multiple that leaves little room for error as the company navigates raw material volatility and Lloyd's sluggish performance. Capital expenditure for the year is set at ₹1,400 crore, with ₹800 crore earmarked for cables and ₹200 crore for a new research and development centre.
