White Goods, Durables - Expect Weak Q3 FY23E With Softer Consumer Offtake After Diwali: ICICI Securities

ICICI Securities Report

We expect the white goods and durables sector to report weak revenues in Q3 FY23E due to:

1. post Diwali slowdown in consumer offtake due to steep price hikes, inflationary pressures and higher interest rates;

2. reduction in trade inventory of fans due to shift to BEE norms; however, we model the inventory-in-trade to recover by H1 CY23; and

3. lower revenues from cables and wires due to price corrections.

We also model Ebitda margins to be weaker ahead due to:

1. higher raw material prices (though input prices have corrected from peak in H1 CY22, they remain higher YoY); and

2. impact of negative operating leverage due to lower sales of fans and cables and wires.

Despite our pessimism in the near term, we remain structurally positive on the sector.

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