After facing a series of challenges including unseasonal rains, weak consumer sentiment, and delayed inventory liquidation, the Indian consumer durables sector is poised for a resurgence in the coming months, said HDFC Securities in a report.
The brokerage firm suggest that categories such as fans, lighting, refrigeration and air conditioning, and kitchen appliances are set to benefit in the latter half of FY24 and FY25. This turnaround is expected to be driven by a rebound in the housing sector, coupled with a high single-digit price increase.
Crompton, Havells, Orient, and V-Guard are anticipated to recover in the Electronic Consumer Durables segment. The sector, which has witnessed a sharp valuation correction in the past 18-24 months due to weak earnings, is now hopeful of better performance in FY24 as commodity prices ease, potentially leading to a resurgence in demand.
Havells India
With a strong real estate cycle and robust B2B traction, the C&W and switchgears sectors are expected to maintain their positive momentum. On the B2C front, there's no notable improvement or slowdown, but optimism prevails for festive season sales. Despite a 20-25 percent price reduction in lighting (especially lamps) due to technological changes, volumes remain strong.
Orient
B2B lighting sales are robust, but B2C faces challenges from technology-driven value erosion. Orient's lamp and fixtures/lumens mix is 50:50, whereas the industry stands at 60:40, with fixtures/lumens being higher-margin products. Switchgear, although currently below 5%, is rapidly growing.
Orient is currently investing in its people, capacity, capabilities, R&D, marketing, and distribution for long-term gains. While these investments will raise overhead costs, the company is committed to enhancing gross margins. Industry-wide operating margins seem to have hit a low point, and improvements are expected with lower raw material costs and better product mix and efficiency.
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