Crompton Consumer vs. Havells India Rating: Buy/Hold | Crompton may be a better bet than Havells

Crompton & HAVells both rallied 20-25% in Q2 on expected synergies from Butterfly/B2B pick-up respectively. Softening commodities have fueled hopes of margin recovery in Q2, given the 10-15% price hikes in last four quarters. Butterfly integration is a key catalyst for Crompton. Weak margin in Lloyd is a key risk for Havells, while its core business is doing better. In FY23-25, we expect Crompton’s PAT to outpace that of HAVL . Buy Crompton; Hold HAVL—rich valuation.

Product mix; Crompton’s new acquisition: Both HAVL & Crompton are key players in their respective product segments. HAVL has higher B2B sales mix at ~25%, whereas Crompton is mainly B2C at ~90%. Crompton is the market leader in Fans, and amongst the Top #3 brands in Pumps, LED Lighting and Geysers. In Feb22, Crompton acquired Butterfly, a South-based kitchen appliance market leader. This could strengthen its position in this fast-growing segment and unleash new avenues for cross-selling. Havells has a diversified product mix, with both electricals and appliances. Its foray into white goods was marked by Lloyd acquisition in 2018. Over FY23-25e, we forecast Crompton’s topline CAGR (+15%) to outpace HAVL (+12%), driven by Butterfly synergies.

Crompton’s margin resilience; Lloyd’s Ebitda weakness: Ability to sustain margins across cycles is a factor of the company’s nimbleness to navigate uncertain macros, market positioning and focus on premiumisation.

Outlook: Over FY23-25, we estimate Crompton’s CAGR to outpace that of HAVL, driven by Butterfly synergies and margin expansion. Crompton’s cost saving programme (‘Unnati’) is likely to support margin expansion. Both are gaining traction in e-commerce and rural, which could support next leg of growth.

Crompton remains one of our top SMID Buys with PT at Rs 505, whereas HAVL stays a Hold on punchy valuation with a Rs 1,340 PT. Key downside risks — sharp volatility in commodities and slowdown in consumer discretionary spend. Lloyd margins will be a key item to monitor at HAVL, whereas Butterfly synergies should be watched at Crompton.