As India’s festival season approaches, the consumer durables industry anticipates a sales resurgence following a challenging first quarter marked by weak rural demand, adverse weather, and inflation. Festivities, including Dussehra and Diwali, are expected to drive strong retail growth.
The consumer durables sector faced difficulties in recent quarters due to unseasonal rains during peak summer, consumer apprehension in the inflationary environment, and delayed clearance of non-rated fan inventory. However, with most of these challenges seemingly behind, and the housing sector remaining robust, analysts at HDFC Securities Institutional Research believe that categories like fans, lighting, air conditioning, and kitchen appliances will benefit in the second half of FY24 and FY25.
Positive Outlook for Electronic Consumer Durables
In the fans category, volumes are expected to rebound in the latter half of FY24, bolstered by a price increase. This recovery is poised to benefit companies like Crompton, Havells, Orient Electric, and V-Guard Industries in the Electronic Consumer Durables segment, according to HDFC Securities. Additionally, the sector offers medium to long-term growth prospects, driven by resilient housing and home improvement themes, under-penetration in most product categories, and opportunities for product diversification.
Festive Season Sales Boost
The introduction of new products, attractive deals, and improved distribution strategies are expected to support consumer durables brands during the upcoming festive season, notes Parag Kulkarni, Senior Vice President-International and President, A.O. Smith India. Analysts at HDFC Securities Institutional Research highlight that demand momentum in the B2B portfolio of consumer durables has been sustained, and the challenges faced in the past year are likely to recede.
The research firm remains optimistic about a strong second half of FY24, commencing with festive season sales. With a softening raw material basket and enhanced scale of operations, margins are expected to rebound and improve going forward.
Top Picks in the Sector
Valuations in the consumer durables sector have undergone a significant correction over the past 18-24 months due to lackluster earnings. In the last quarter, the Nifty Consumer Durables index outperformed the Nifty 50 index, registering a 6.7 percent increase. “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,” states HDFC Securities in its report.
