As the temperatures soar, savvy investors are turning their attention to air conditioning stocks, not just for comfort but also to enhance their portfolios. Recently, Motilal Oswal reiterated its ‘Neutral’ stance on the stock of Havells, setting a target price of ₹1,650. The firm remains optimistic about growth prospects in the core segment, particularly through the Lloyd brand, which is making significant strides in the market.

Lloyd’s Strategic Positioning in the RAC Market

Havells is enhancing its presence in the Residential Air Conditioning (RAC) sector, primarily through its Lloyd brand. The company is concentrating on split air conditioners and improving operational efficiency. Over the past few years, Lloyd has successfully captured market share and is now recognized as one of the top three players in the RAC industry.

• Revenue Breakdown:
  • 75% of Lloyd’s revenue is derived from RACs:
  • 80% Split ACs
  • 20% Window ACs
  • The remaining revenue comes from washing machines, refrigerators, and televisions.

Lloyd is dedicated to building its brand through various strategies, including expanding distribution channels, launching innovative products, and investing in manufacturing and customer engagement. Over the last four years, the capital expenditure for Lloyd reached ₹7,700 crore, which represents 36% of Havells’ total capital investments during that timeframe.

Expanding Manufacturing Capacity

To further capitalize on the growing demand for RACs, Havells plans to boost its manufacturing capabilities to 3 million units by the fourth quarter of FY25, with an investment of ₹50-60 crore. Additionally, the company is establishing a refrigerator manufacturing unit with a capacity of 1.4 million units in Rajasthan, projected to be completed by September 2026 at an estimated cost of ₹4,800 crore. These initiatives, along with investments in modern retail and quick commerce, are expected to contribute significantly, with e-commerce and modern retail formats together accounting for 40% of Lloyd’s overall revenues.

Strengthening Distribution Networks

Havells is actively enhancing its distribution framework by expanding into modern trade channels such as Croma, Reliance Digital, and Vijay Sales. This strategic move is aligned with the company’s focus on modern trade, enabling better reach and customer engagement.

Focus on Lighting Business Growth

Havells’ lighting division is segmented into consumer and professional lighting, emphasizing premium offerings, innovation, and efficiency in response to ongoing price pressures in the LED sector. The company has achieved impressive volume growth of 15%, despite facing slight price declines, by shifting its portfolio towards value-added products. Currently, the industry’s mix consists of 60% bulbs and batons and 40% value-added items, while Havells has successfully reduced its dependency on bulbs to 40%.

In summary, as temperatures rise, Havells is not just focused on providing cool comfort but is also strategically positioning itself for sustained growth in the air conditioning and lighting markets. With ambitious expansion plans and a commitment to innovation, the company is well on its way to solidifying its market leadership.