In every few quarters, many investors look for one clear indicator – is demand finally improving or is the slowdown stretching longer? In the case of home appliances and fast moving electrical goods, these kinds of questions have become even more important and have a seasonal twist to it also. Leading international brokerage house, Goldman Sachs has maintained a ‘Buy’ on one such home appliance and electrical goods stock – Havells.
Goldman Sachs has set a target price of Rs 1,880 per share. This implies an upside potential of 30.1% from the current market price. As per the brokerage house report, the optimism is based on a combination of stabilising demand, improving business mix and signs that the earnings downgrade phase may be ending.
Let’s take a look at the key reasons why the brokerage is bullish on this stocks and what is the rationale behind it –
Goldman Sachs on Havells: Q3FY26 performance
Havells reported 14% year-on-year revenue growth in Q3FY26, a period that is typically seasonally weak for some of its businesses. According to the brokerage house report, growth was stronger when the Lloyd consumer durables business was excluded, with revenues rising 18% year-on-year.
The performance was led by cables and wires, where volumes grew more than 25%, and by the “Others” segment, which mainly includes solar products. These gains helped offset weaker demand in lighting and summer-focused categories such as fans, air coolers and air conditioners.
According to the brokerage report, earnings before interest, tax, depreciation and amortisation (EBITDA) margins stood at 9.3%. This was broadly in line with expectations and 50 basis points higher year-on-year, even though Lloyd saw lower cost absorption during the quarter.
Goldman Sachs on Havells: Why margins dipped and why that may reverse
While operating margins held up, gross margins declined 140 basis points year-on-year. As per the brokerage report, this was largely due to higher input costs and temporary under-absorption in the cables and wires segment.
The brokerage believes this pressure is not structural. According to the brokerage report, some of these cost headwinds should ease in the fourth quarter as utilisation improves and volumes pick up. It also noted that inventory levels in room air conditioners have largely normalised, which could help support stronger growth in the coming quarter.
Furthermore, the brokerage house noted that the “Earnings downgrade cycle is over for Havells.”
Goldman Sachs on Havells: What could drive growth ahead
The brokerage firm also noted multiple tailwinds lining up ahead. As per the brokerage report, a possible reduction in goods and services tax could help the room air conditioner business pass on rising costs more smoothly.
At the same time, solar products are expected to “continue the momentum seen in this quarter” and contribute more meaningfully to overall revenues.
Other segments also benefit from a favourable base, which could make growth appear stronger in the coming quarters. According to the brokerage report, with growth likely to accelerate, there is scope for “positive operating leverage”, where profits grow faster than revenues as fixed costs get spread over higher volumes.
The brokerage house noted, “a diversified player with Cables and Wires exposure like Havells looks well protected” compared with more narrowly focused peers.
Goldman Sachs on Havells: Balance sheet investments and long term capacity
During the first nine months of FY266, the company stepped up capital expenditure to Rs 1,190 crore, up from Rs 750 crore in FY25, mainly due to new cable manufacturing facilities at Tumkur and Alwar.
The company also invested Rs 600 crore to acquire a stake in Goldi Solar, contributing to modest associate income. Additionally, Havells recognised Rs 130 crore in intangible assets related to a settlement with HPL Group over the use of the “Havells” brand.
Conclusion
Overall, according to the brokerage report, improving demand visibility, stabilising margins and a stronger product mix underpin the revised “12 month target price of Rs 1,880”.
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor.