Consumer Durables share price target

The Coronavirus has had a widespread impact across major economies and is now becoming a global emergency. China's (the epicentre of Coronavirus) manufacturing capacities have shut down for over a month now, creating a supply disruption of finished goods/components for consumer durable companies operating in India. However, most vendors had already made provisions for inventory due to the Chinese Lunar New Year holidays. Hence, there may not be an immediate impact in the current quarter. Our interaction with the management suggests that extension of plant shutdown...

We remain constructive on the company as (1) 55% revenues come from MNCs, which ensures stickiness of business, (2) EBITDA margins are stable at >12% since fluctuations in RMC are easily passed through to customers, and (3) Return ratios are strong (RoE/RoIC of 22.0/20.0% in FY21 and 21.4/19.9% in FY22 respectively). Galaxy is a preferred supplier of surfactants to leading FMCG companies. Thus, it is important to value it against FMCG and chemical stocks at extreme ends. Since, its products are specialised but lack branding and pricing power, it should trade at a multiple closer to chemical and at a discount to FMCG companies. Our TP of Rs 1,811 is at 22x Dec-21x EPS (versus the consensus TP of Rs 1,593). Galaxy performed moderately in Q3. However, we maintain our BUY owing to its loyal customer base, stable margins profile and healthy return ratios.

Our optimism on longevity of appliance sector is driven by (1) Rapid change in consumer affordability & preferences, (2) Rising share of branded products, (3) Multi-year growth opportunity (under penetrated), (4) Untapped rural market (rural electrification, rising rural focused strategy by leading companies) and (5) Scope of premiumisation. Appliances are more sensitive to GDP growth. Thereby, any improvement in the economy in 2020 will provide better prospects for the sector. We continue to like companies who are leaders in their respective categories and have ability to tap opportunity in other categories. In consumer appliances, we have BUY rating on Havells, Voltas, Crompton Consumer and Symphony. We did a roadshow with an industry veteran for consumer appliances. Key discussion was around (1) Robust performance of appliances in CY19, (2) Structural drivers of appliances, (3) Disruption from Chinese players and (4) Winning strategies.

Consumer Appliances: Stand out in consumption Our top picks in Appliances: Havells and Symphony FMCG: Status quo maintained Top picks in FMCG: Jubilant FoodWorks, Dabur and Britannia

The market for quick service restaurants (QSRs) in India displays faster growth trends than other consumer categories and offers a big opportunity with strong scalable franchises. JUBI/WLDL are growing in double digits and have recorded a five-year sales CAGR of 14%/15% compared with 7% for our consumer staples universe. This report is solely produced by Emkay Global. The following person(s) are responsible for the...

Top Picks: Dabur, Jubilant FoodWorks, Britannia, United Spirits and Symphony In our two day consumer forum in Mumbai, we arranged participation from various consumer companies i.e. FMCG, Liquor and Appliances sectors. Following are the key highlights of the discussion.

affordability are likely to drive better penetration and premiumization-led growth. The increasing probability of households to use leverage and the easy availability of consumer finance, along with investments by players to enhance distribution reach beyond the major cities, are proving to be major enablers of growth on the demand and supply sides. As per a report by CEAMA and Frost & Sullivan, the appliances and consumer electronics industry is projected to double to Rs 1.48 lakh crore by 2024-25. The market...

Jewellery:Our coverage universe is expected to be washout as the sudden spike in gold prices June-end onwards have kept consumers at bay. Revenue/EBITDA/EBITDA margins are expected to be flat YoY as the lower-margin gold-exchange scheme is pushed to salvage volumes. Channel checks suggest most of the big-box jewellery retailers have clocked flattish-to-single digit declines in revenue for 2Q. That said, key monitor-able would be the off-take in the upcoming festive season and assessing how big the lag could be before consumers adjust to the new price. This will be the second quarter of Un-Titan-like performance and investors would be keen to understand for how long the pain could last. Thangamayil could be hurt even more given the heavy base of 2QFY19. FMCG: Our FMCG coverage universe is expected to deliver 7/9% YoY revenue/EBITDA growth in 2QFY20 (vs. 13/14% in 2QFY19 and 7/10% in 1QFY20). Rural stress has aggravated and is now growing slower than urban (vs. 1.2-1.3x in FY19). Weak consumer sentiments has led to downtrading in few categories. Consumer Appliances: Our coverage universe is expected to post 9/16% revenue/EBITDA growth (18/1% in 2QFY19). Appliances is expected to deliver a better quarter vs. FMCG. Outperformance is driven by low channel inventory of cooling products owing to a harsh summer. However, we expect growth to moderate in categories ex-cooling products. We expect margins to expand led by favorable base, soft commodity inflation and price hikes.

market is in for a shakeout as smart phone giants try to redefine the pricing and rules of games, thus squeezing the already thin margins of incumbents. In less than 2 years since its launch, Xiaomi has become the market leader (39% market share) in smart LED TVs by bundling the latest features at the most accessible price points. Prices this festive season have halved on the...

market is in for a shakeout as smart phone giants try to redefine the pricing and rules of games, thus squeezing the already thin margins of incumbents. In less than 2 years since its launch, Xiaomi has become the market leader (39% market share) in smart LED TVs by bundling the latest features at the most accessible price points. Prices this festive season have halved on the...