Havells India's muted Q2 leaves investors sweating amid earnings downgrades

Copyright © HT Digital Streams Limited All rights reserved. With many air conditioners, fans and coolers left unsold, Havells’ growth and margins plunged in Q2. Summary For Havells, a shorter than usual summer meant less cooling products flying off the shelves, and then there was an overhang from higher channel stock. Brokerages cut earnings estimates due to weak second-quarter performance of Havells India Ltd. Investors experienced a modest earnings performance in the September quarter (Q2FY26). Continued weakness in demand for summer products and other consumer accessories led to modest revenue growth of 5% YoY to ₹4,779 crore. A shorter-than-usual summer in 2025 meant fewer refrigeration products flying off the shelves. In addition, there was an overhang of higher channel inventory. With many air conditioners, fans and chillers left unsold, growth and margins were dented, and working capital increased. But a relief is that it could be a blip. According to management, they are working closely with dealers to promote the decline, and they expect channel inventory to normalize by the end of Q3FY26. If one part of Havells kept the lights on (literally) this quarter, it was the cable business. While consumer durables slowed, the cable segment posted a strong 12.4% year-on-year revenue growth in Q2FY26. This was driven by strong demand for power cables, management said. Better yet, cable contribution margins rose to 17.7% this quarter from just 12.3% in Q2 last year, boosting overall profitability. Contribution margin is a measure of profitability calculated by subtracting variable costs, such as material costs, manufacturing variables, and direct sales variables, from net income. On the other hand, the consumer durables (ECD) division – fans, small appliances, etc. saw a 2% decline in revenue and lower margins at 21% in Q2FY26 as against 23.3% a year ago. However, the real sore spot was Lloyd-Havells air conditioning and TV arm. Lloyd’s second-quarter revenue fell 18.5% year-on-year, and its contribution margin almost disappeared, to 1.7% from 14% a year ago. Lloyd’s margins were impacted due to lower revenue and higher consumer offers to clear AC inventory in the weak summer, management said. Havells has experienced tougher cycles in the past, and the Q2 pain at Lloyd appears largely seasonal. Management expects a recovery in H2 as inventories normalize and new energy efficiency norms spur new demand. Margins in focus Havells continues to spend on marketing, R&D and capacity and the push towards higher-end, higher margin products is also visible. The share of premium products is increasing in categories such as fans, appliances and ACs. Sure, developing premium offerings costs more upfront, but it’s an investment that can pay off with pricing power. Therefore, this should help improve margins in the long term. However, earnings estimates have been cut by several brokers for now. “Taking into account our Q2 performance, we have cut our revenue estimates by 2/3% and APAT estimates by 6/3% for FY26/27E,” HDFC Securities report dated October 20 said. So far this calendar year, the Havells India stock has fallen 10%, compared with an 8% rise in the Nifty50 index. On a FY27 price-to-earnings basis, the stock trades at a price-to-earnings ratio of 46 times, Bloomberg data showed. It is not cheap in the current background. According to Yes Securities, the worst in terms of B2C demand and high channel inventory is behind. Even so, the broker cut its revenue forecast, particularly for B2C summer products, on poor performance in the first half of the financial year and high channel inventory, which led to a drop in revenue for Lloyds in FY26 on extremely strong growth from FY25. Get all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download the Mint News app to get daily market updates. more topics #market to maket #markets premium Read next story