Why is Havells India Ltd. falling/rising?

Recent Price Movement and Market Outperformance

Havells India Ltd. has demonstrated robust price appreciation over the past week and month, with gains of 6.19% and 4.45% respectively, significantly outperforming the Sensex benchmark, which rose only 0.46% and declined 0.76% over the same periods. Year-to-date, the stock has advanced 5.24%, while the Sensex has marginally declined by 0.18%. This recent upward trajectory is further underscored by the stock’s three consecutive days of gains, accumulating a 5.91% return in that span. On 06-Jan, the stock touched an intraday high of ₹1,505.95, marking a 3.66% increase, signalling strong buying interest throughout the trading session.

Investor participation has also been on the rise, with delivery volumes on 05-Jan reaching 2.53 lakh shares, a 2.09% increase compared to the five-day average. This heightened activity suggests growing conviction among market participants. Additionally, the stock’s price remains above its 5-day, 20-day, 50-day, and 100-day moving averages, indicating sustained short- to medium-term strength, although it remains below the 200-day moving average, which may act as a longer-term resistance level.

Strong Fundamental Backing Supports the Rally

Havells India Ltd. is distinguished by its strong long-term fundamentals, which underpin the recent price gains. The company has maintained a low debt profile, with an average Debt to Equity ratio of zero, reflecting prudent financial management and minimal leverage risk. This conservative capital structure has enabled the company to generate a high average Return on Capital Employed (ROCE) of 32.27%, indicating efficient utilisation of capital to generate profits.

Net sales have grown at an impressive annual rate of 20.77%, while operating profit has expanded by 15.58% annually, signalling healthy top-line and margin expansion. Despite the stock’s one-year return being negative at -8.72%, the company’s profits have still increased by 3.7% over the same period, suggesting underlying operational resilience. The stock trades at a Price to Book Value of 10.9, which is considered fair relative to its peers’ historical valuations, supported by a Return on Equity (ROE) of 16.9%. However, the PEG ratio of 17.7 indicates that the stock is priced with expectations of continued growth, which investors appear willing to support given the recent price momentum.

Institutional investors hold a significant 34.81% stake in Havells India Ltd., reflecting confidence from sophisticated market participants who typically conduct thorough fundamental analysis. This institutional backing often provides stability and can drive sustained demand for the stock.

With a market capitalisation of ₹91,097 crore, Havells India Ltd. is the second largest company in its sector, accounting for nearly 30% of the sector’s market value. Its annual sales of ₹21,667.22 crore represent 24.12% of the industry, underscoring its dominant position and influence within the sector.

Balancing Recent Gains with Longer-Term Performance

While the recent price appreciation is encouraging, it is important to contextualise it within the stock’s longer-term performance. Over the past year, Havells India Ltd. has underperformed the Sensex, delivering a negative return of -8.72% compared to the benchmark’s 9.10% gain. Over three and five years, the stock has also lagged the broader market, with returns of 25.81% and 58.61% respectively, versus the Sensex’s 42.01% and 76.57%. This suggests that while the company’s fundamentals remain strong, broader market factors and sector dynamics have influenced its relative performance.

Nonetheless, the recent surge in price and volume, combined with solid financial metrics and institutional support, indicate renewed investor interest and confidence in Havells India Ltd.’s growth prospects. The stock’s liquidity, with a tradable size of approximately ₹1.19 crore based on recent averages, further facilitates active trading and investor participation.

In summary, Havells India Ltd.’s share price rise on 06-Jan is driven by a combination of strong fundamental performance, favourable technical indicators, and increased investor engagement. The company’s low debt, high profitability, and significant market presence provide a solid foundation for sustained growth, which the market appears to be recognising through the recent price gains.

Get 2 full years of MojoOne Premium for only Rs. 12,999. Subscribe for 1 year and we'll add another year FREE. Offer valid for a limited time. Start Saving Now →