Consumer,
Electrical Consumer Durables:
Nilesh Bhaiya, analyst for consumer durables and capital goods at BNP Paribas, stated, “According to dealers, Orient and Havells have already developed a good brand recall in premium categories and decorative fans” in electrical consumer durables. We believe this will assist them in expanding their premium market share,” he added.
The analyst at BNP anticipates a rise in the level of competition, particularly in the low end of the market (fans with one star ratings), where several players like Usha, Bajaj, and new entrants like Kent are gaining volume market share. However, it is anticipated to be a threat to Crompton, the market leader by volume of fans.
Overall, Nilesh stated that “The true test of demand for fans should begin in April 2023.” This pertains to electrical consumer durables. The majority of dealers are optimistic that demand will rise as a result of the El Nino effect.”
Light:
Moving on to lighting, Nilesh revealed that primary sales of other equipment, including switches and lighting, decreased in the third quarter of the year 23 because many dealers used a significant portion of their working capital to stock non-rated fans. Went. However, dealers reported normal channel inventory levels for switches and lighting.
He added, “The B2C lighting market is being aggressively disrupted by new entrants, such as Indiabulls and BPL (a brand owned by Reliance Retail).” Dealers anticipate that a more powerful parent company will intensify competition. New players may enter the market, which may result in a price war.” posing a threat to incumbents’ margin profiles, such as Crompton, Syska, Bajaj, Polycab, and others.
In the lighting industry, Nilesh observes a consistent pricing pattern. However, dealers anticipate that prices could be affected in the coming quarters by an increase in the level of competition.
Pump:
Nilesh added that there has also been more competition in the pump market because companies that used to sell agricultural pumps have started selling residential pumps. Crompton is watching out for the opposition and has found a way an estimating ways to contend with the participants.
Prices are expected to remain under pressure in the pump market. He continued, “Many unorganized players in this space are competing aggressively on pricing, and we expect the pricing list to go up if the demand slows down this year, as seen in the last three years.” will be more difficult to eradicate.”
In addition, dealers are keeping an eye out for any increase in demand in order to adjust their stock levels for the upcoming season.
Cables & Wires:
According to Nilesh, dealers stocked up on inventory while on cables and wires due to the sudden rise in copper prices at the end of 3QFY23. Regardless of 5-6 percent increment in costs over the most recent two months, the interest for links and wires stays great. However, dealers anticipate further price declines due to global macro volatility, as copper prices have decreased by roughly 7% in the last month.”
“Our channel analysis suggests that dealers and distributors are reluctant to build up higher inventories,” he said in addition. As a result, growth in cable and wire volume could be offset by a sharp decline in copper prices. We feel This is a negative for Polycab, which we desire to offer.” Due to the high-base effect, our coverage universe experienced the lowest earnings growth from FY23 to FY25.
white goods:
Nilesh stated that AC dealers began receiving customers in this consumer durables market toward the end of February. However, some areas experienced unseasonal rains following Holi, causing damage to the population. Regardless, the sellers are sure of progress in footfall after the Gudi Padwa celebration (22nd Walk 2023) and have offered a few extra limits to charm the clients.
White goods prices, according to dealers, also remained stable. The BNP analyst stated that some dealers anticipate a continued high level of competitive intensity as a result of the majority of brands’ plans to expand their shelf space. If demand rises, most dealers anticipate some price increases in mid-April or May. Since then, Lloyd’s has forecast less intense competition. Daikin and Panasonic, on the other hand, have become extremely aggressive. Customers are switching from lesser brands like Amstad and Cruise to well-known brands like Voltas, Blue Star, LG, and Daikin as a result of the narrowing price gap between brands.
Which consumer durables stocks are hot this summer?
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The BNP analyst stated, “We see a downside risk for cables and wires companies, while valuations of white goods and FMEG companies offer higher upside.”
Consequently, Havells and Whirlpool keep on being BNP’s top picks, while Voltas is its mid year #1. Due to Polycab India’s high valuations, the brokerage’s analyst has assigned it a “Reduce” rating.
Disclaimer: The views and recommendations given above are of individual analysts or broking companies and not of o2help. We advise investors to do due diligence with certified experts before making any investment decision.
