Festive season set to light up consumer durables; Crompton, Havells among top picks

Consumer durable categories like fans, lighting, air conditioning, and kitchen appliances will see benefits in H2FY24 and FY25.

Consumer durable companies are expected to get a sales boost with the upcoming festive season, after weak rural demand, bad weather and inflation marred the fiscal first quarter. India's festival season is set to kick off in late October. Experts expect good retail growth on account of Dussehra, Diwali, and other festivals.

The consumer durables sector has seen various challenges over the last few quarters due to unseasonal rains in the peak summer months; weak consumer sentiment due to the inflationary environment; and delayed liquidation of non-rated fan inventory. However, with most of these headwinds now appearing to be behind, and with the ‘housing’ theme still in good shape, analysts at HDFC Securities Institutional Research believe categories like fans, lighting, air conditioning, and kitchen appliances will see benefits in H2FY24 and FY25.

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Electronic consumer durables outlook positive

In the fans category, volumes will bounce back in the second half of FY24 along with the benefits of a price increase. It should recover the Electronic Consumer Durables segment for Crompton, Havells, Orient Electric, and V-Guard Industries, HDFC Securities said. Meanwhile, the industry enjoys GDP multiplier benefits. It offers medium to long-term growth opportunities, given resilient housing and home improvement themes; under penetration of most product categories; and product basket diversification opportunities.

Festive season to boost sales?

The focus on launching new products, coupled with good deals and enhanced distribution, should help brands during the festive season ahead, according to Parag Kulkarni, Senior Vice President-International and President, A.O. Smith India. According to analysts at HDFC Securities Institutional Research, demand momentum in the B2B portfolio of consumer durables has sustained. The challenges witnessed in the past 12 months are expected to end.

“The industry remains hopeful of a good H2FY24 starting with festive season sales," the research firm said, adding that with softening RM basket and improving scale of operations, margins have likely hit a trough and are expected to improve hereon.

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Stocks that may 'light up'

In the past 18-24 months, valuations across the consumer durables sector have seen a sharp correction due to a weak earnings show. The Nifty Consumer Durables index has outperformed the Nifty 50 index in the last quarter, rising 6.7 percent. "The easing commodity basket could lead to a return of price-elastic demand and enable better operating performance in FY24. Our top picks are Crompton and Havells," HDFC Securities said in its report.

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