 "Soaring temperatures help consumer durable firms rake in moolah in Q1")
Listed consumer durable companies have outperformed benchmarks and the broader markets in the past year. The top 8 listed stocks in this sector have delivered 69 per cent returns, while the Nifty50 is up 24 per cent and the Nifty500 gained 37.5 per cent over this period. In addition to a good performance in the June quarter, hopes of a recovery in domestic appliances and price hikes are the key near- term triggers for the stocks going ahead.
Top line growth in the June quarter is expected to be strong as rising temperatures increased the demand for air conditioners in the April-June quarter. JM Financial said in its report that companies witnessed the highest growth in Room Air Conditioners (RAC) on the back of a strong season, and improvement in demand for refrigerators.
Analysts led by Deepak Agarwal of the brokerage said that the sector witnessed a strong primary volume growth of 40-50 per cent in Q1FY25. Also, companies have taken a price hike of 3-5 per cent which will also help in an overall improvement in realisation and margins in Q2FY25.
Prabhudas Liladhar said that brands in the RAC segment had taken price hikes and the segment also benefited from low inventory in the channels which were particularly in favour of Voltas and Lloyd.
“We expect our consumer durables universe to register sales/operating profit /net profit growth of 14.5 per cent /21.0 per cent /20.6 per cent Y-o-Y in 1QFY25,” the domestic brokerage said in its report.
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It expects Polycab, Havells and Voltas to outperform, while Bajaj Electricals may underperform in sales. In terms of profitability, Havells and Voltas are expected to outperform.
Nuvama Institutional Equities said in its report that the surge in demand for cooling appliances in the quarter comes after several years of weak demand. “Directional growth improvement hereon is likely as this quarter marks an inflection point for consumer durables,” it added.
It also stated that in its channel checks in the quarter, “the industry is overwhelmed with a sales surge in the wake of the heatwave. Cooling appliances grew 30–40 per cent during March-May. Other categories grew too and kept the momentum upbeat (refrigerators up 20 per cent YoY). Soaring demand caused supply shortages in a few RAC models.”
“According to industry body CEAMA (Consumer Electronics and Appliances Manufacturers Association), volume growth in cooling appliances was robust over March to May, led by sales of ACs and air coolers. The association anticipates 14 million RAC sales in 2024, implying volume growth of 27 per cent Y-o-Y,” said the brokerage report. This season, Tier-III, -IV, -V towns also rebounded after years of decline. March–May accounts for a major portion of annual sales: 60 per cent for ACs and about 40 per cent for other consumer durables., it added.
The segment that did not take off in the quarter was fans. Demand was weak as customers preferred RAC and room coolers due to soaring temperatures.
JM Financial expects volume growth of 10-12 per cent and revenue growth of 15-18 per cent due to price hikes of 4 per cent and improved product mix. It expects Crompton Greaves Consumer and V-Guard to gain market share in Q1FY25.
Prabhudas Lilladher Research also highlighted that the fans segment did not see a significant rise in demand due to the transition from fans to coolers during the quarter.
“However, the companies announced a price hike in the fan segment. The lighting segment continues to face challenges in the B2C segment, while B2B/B2G continues to see strong traction. We expect companies to report double-digit growth in the fast-moving electrical goods segment over the low base of the previous year's same quarter,” it said.
It also witnessed in its channel checks that Voltas, Daikin, and Hitachi were consistently mentioned as the most-selling brands. 1.5-ton models, especially 3-star inverters are the most popular across brands.