Havells earnings estimate just got cut by half as it loses the best time to sell fans and ACs

• Havells shares climbed almost 6% on May 13 — all thanks to the Indian government’s ₹20 lakh crore stimulus package.
• The share price has lost nearly a quarter of its value since the beginning of 2020.
• Lockdown being in the peak season is the major reason for the impact on the sales of the quarter ended in March.

Havells India shares climbed almost 6% on May 13. It wasn’t entirely because of the earnings ⁠— the revenue fell by a fifth and the profit over 10% in the Jan-March period⁠— but the investors were cheering the Indian government’s ₹20 lakh crore stimulus package, declared by Prime Minister Narendra Modi, hoping that it would revive the prospects consumer goods companies.

The reality got starker a day after (May 14) and the stock lost 2.34% in early trade.

"Havells’ loss of revenues in April-June would be significantly higher than the previous quarter on account of loss of the most lucrative period of sales for cooling products (fans and ACs). Cables/wires/lighting businesses have exposure to construction/real estate/government projects, which may take a longer time to recover," said Kotak Institutional Equities in a report which the EPS estimate for the next financial year by nearly half and the target price for the stock by 8% to ₹475.

Havells share price has lost nearly a quarter of its value since the beginning of this year.



Although the coronavirus lockdown period was just for one week in the quarter ended on March 31, But, Havells reported a 10.69% decline in its consolidated net profit to ₹177.73 crore. Its operational revenue was down 19.50% from ₹2,754.77 crore a year ago to ₹2,217.44 crore.

“The loss in the last 15 days had a crippling effect. It seems if the disruption had not occurred, Q4 would have grown at 9%,” said Chairman and Managing Director Anil Roy Gupta said in a conference call with analysts.

“Environment continues to be challenging”

Unfortunately for Havells, the ongoing lockdown has come in during summer, the peak season for one of its biggest products - fans. For Havells “February and March are the months where the dealer starts picking up pretty well over the year-end closure. But this time, major sales happened during the last ten days,” said Gupta.

Going forward, buyers may also postpone purchases of other electrical goods too, given the rising uncertainty around the economy, businesses, jobs, and salaries. The lockdown in the last quarter lasted a week, but in the second quarter i.e. April to June, Havells like other companies, has lost six weeks of business.


Most big cities, the biggest market for consumer goods, remain in the red zones, where businesses aren’t allowed to operate. “Urban areas are contributing somewhere between 35-40% of the sales right now. In the red zones, 35-40% sales points are open in the orange and green zone most of the shops are open but a very limited activity — just about 30-40% activity,” said Gupta.

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