Expanding Cable Capacity And Goldi Solar Partnership Will Unlock Potential

Key Takeaways

• Expansion in cables, wires, and renewable energy partnerships positions Havells to benefit from infrastructure growth and the shift toward energy-efficient products.
  
• Strategic rural market targeting and focus on premium, solution-oriented offerings drive margin resilience, operational efficiency, and higher-quality revenue streams.
  
• Persistently high inventories, margin pressure in core segments, pricing challenges, and overdependence on the Indian market threaten sustainable revenue growth and margin stability.

Catalysts

A fast-moving electrical goods company, manufactures, trades in, and sells various consumer electrical and electronic products in India and internationally.

• Havells' substantial investment in expanding its cables and wires capacity, including doubling underground cable output through FY27 and moving into medium/high voltage, is poised to capitalize on robust infrastructure and real estate growth, as well as government electrification drives-supporting higher revenue growth and operating leverage over the medium term.
  
• The company's ₹600 crore strategic partnership with Goldi Solar positions it to benefit from the accelerated shift toward renewable energy solutions and energy-efficient products, which will expand Havells' accessible market, enhance premium product sales, and provide a meaningful new engine for revenue expansion.
  
• Continued focus on rural distribution expansion and the introduction of branded products tailored to these markets unlocks a significant underpenetrated customer base; as rural electrification and disposable income rise, this should deliver incremental volume growth and contribute positively to topline and long-term margin resilience.
  
• Investments in manufacturing automation, supply chain flexibility, and disciplined cost control have already improved operational efficiency and gross margins; further scale in premium categories and ongoing cost management are likely to drive gradual improvement in net margins and earnings quality.
  
• Expansion of premium, solution-oriented offerings in categories like lighting and smart appliances leverages rising consumer preference for digitalization and connected homes, allowing Havells to grow higher-margin revenue streams and defend pricing power, contributing to improved profitability.

Havells India Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Havells India's revenue will grow by 13.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from 6.6% today to 7.7% in 3 years time.
• Analysts expect earnings to reach ₹24.0 billion (and earnings per share of ₹38.42) by about August 2028, up from ₹14.1 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as ₹21.3 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 68.4x on those 2028 earnings, up from 66.1x today. This future PE is greater than the current PE for the IN Electrical industry at 40.7x.
• Analysts expect the number of shares outstanding to decline by 0.32% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 15.64%, as per the Simply Wall St company report.

Havells India Future Earnings Per Share Growth

Risks

• High channel and company-level inventories across ACs, fans, and coolers create the risk of forced discounting or slow-moving stock, which could depress revenues and put net margins under pressure if subdued demand persists or recovery is slower than anticipated.
  
• Declining margins in the ECD (Electrical Consumer Durables) segment despite a focus on premiumization suggest intensifying competition and/or product mix issues; this may signal a structural inability to defend pricing power, impacting both earnings and potential revenue growth.
  
• Exposure to price deflation in core product lines like LEDs (noted 10% YoY price decline) and the risk that further commoditization or margin erosion in lighting and wiring segments could depress profitability, especially if Havells cannot maintain innovation or differentiation over the long term.
  
• Heavy investments and capacity expansion in cables, wires, and the renewable (solar) sector carry execution risks: if the infrastructure upcycle underperforms, or exports don't materialize as hoped, the company may face underutilized assets and weaker returns on capital, hurting long-term revenue growth and earnings stability.
  
• Continued overdependence on the Indian domestic market and slow rural penetration (rural share stuck at 5–6%) leaves Havells vulnerable to cyclical demand slowdowns and local competition, which may limit the pace of revenue growth and expose net margins to volatility.

Valuation

• The analysts have a consensus price target of ₹1708.378 for Havells India based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹1915.0, and the most bearish reporting a price target of just ₹1350.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹311.1 billion, earnings will come to ₹24.0 billion, and it would be trading on a PE ratio of 68.4x, assuming you use a discount rate of 15.6%.
• Given the current share price of ₹1488.7, the analyst price target of ₹1708.38 is 12.9% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.