Orient Electric

Orient Electric reported a robust Q3 FY25, with revenue reaching INR 817 crores, an 8.6% year-on-year increase and a significant 24% sequential growth. The 9-month revenue stood at INR 2,232 crores, growing 10.2% YoY. Despite a challenging consumer demand environment, the company demonstrated resilience, driven by strong festive season sales in October and a late winter onset boosting heating product demand in December.

The company's core strategy of premiumization is yielding positive results, helping navigate gross margin challenges. In lighting, premium value-add products like COB, high-value panels, rope lights, and floodlights now contribute almost 50% of the segment's revenue, an improvement of 400 basis points YoY. For fans, new BLDC and IoT launches drove 60% growth in Q3, now comprising 20% of the overall ceiling fan category and growing at 25%. The ambition is to increase the premium Deco category contribution from 30-31% to 45%.

The Lighting and Switchgear segments continued their strong performance, achieving nearly 12% year-on-year growth, which management noted as superior to the industry, despite ongoing price erosion in the B2C market. The B2B lighting segment, contributing 20% of lighting revenue, also showed promising high double-digit growth, supported by infrastructure projects. The Electrical Consumer Durables (ECD) segment, including fans and appliances, grew 7.3% YoY and 30% QoQ, despite Q3 being a traditionally lean season for fans.

Gross margins have stabilized in the 31% to 33% range, improving by 184 basis points YoY and 213 basis points YTD, attributed to premiumization, channel reorganization, and better product mix. Operating EBITDA margins for Q3 rose to 7.5%, a 98 basis point improvement YoY. The 'Spark Sanchay' cost optimization program delivered INR 52 crores in savings year-to-date, representing a 13% YoY improvement. Employee costs as a percentage of revenue also saw a positive trend, decreasing to 9.2% in Q3 from 10.2% in Q1.

Orient Electric is actively expanding its direct-to-market (DTM) presence, now covering 11 states, with DTM contributing 30% of fan revenue compared to 70% from master distributors. DTM markets are reportedly growing faster, leading to market share gains in both Lighting and Fans. The company is also focusing on fast-growing e-commerce platforms like Blinkit and Zepto to enhance product discovery and market share in fans and heating appliances.

Management is optimistic about the upcoming summer season and expects government spending in Q4 to boost sentiment, especially for cooling categories and B2B projects. They aim to achieve high single-digit operating EBITDA margins in the next 4 quarters, with an ambition to eventually reach double digits. A detailed 3-year revenue plan will be shared by April/May, with a continuous focus on growing faster than the industry.