Consumer Durables Q2 Earnings Review - Demand To Pick Up With Improvement In Consumer Sentiment: Dolat Capital

Dolat Capital Report

In Q2 FY23, fast moving electrical goods sector was affected by inflationary pressures as well as subdued consumer sentiment. Margins of most companies were lower than our and consensus estimates, hit mainly due to full absorption of high cost inventory. Category-wise performance in Q2 FY23 is as follows-

• During Q2 FY23, most companies exhibited double digit revenue growth in cables and wires, primarily led by volumes (three-year revenue compound annual growth rate ~15%). Margins were severely impacted due to high cost inventory, and softer realization on account of falling raw material prices.

• Electrical consumer durable segment (small appliance) volumes were impacted mainly due to seasonality, inflation, and channel destocking on account of the BEE transition in fans business. Other small appliances like water heaters and mixer grinders saw decent pick-up.

• In lighting business, Orient Electric Ltd. outperformed peers in Q2 with 15% YoY revenue growth.

• The room air conditioner industry absorbed a significant portion of the cost inflation initially, and is currently recouping the lost margins. Room AC sales in Q2 remained muted due to seasonality, BEE star rating change and lower consumer demand.

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