Consumer Durables share price target

Consumer Durables: Channel checks Premium products, wires and cables shine. Power: Focus shifting to hybrid and RTC power

Dealers saw mixed demand across products during festive-cum-wedding season from September to November

We hosted the management of seven companies in the consumption sector in our Nuvama Emerging Ideas Conference 2023,' namely Arvind Fashions, Brand Concepts, Cantabil Retail, Arvind, Parag Milk Foods,

Industry Report

As per data released by Bizom, the sales of the FMCG sector in Q2FY24 declined by 2.3% YoY, an improvement from the previous quarter’s decline of 4.6% YoY. Urban sales decline was at 0.6% YoY (vs. a decline of 4.7% YoY in Q1FY24) while rural sales decline was at 3.1% YoY (vs. a decline of 4.6% YoY in Q1FY24). Beverages (-12.1% YoY) and commodities (-14.9% YoY) were laggards in terms of YoY sales, while Home care saw the highest growth at 16.8% YoY, followed by confectionary at 9.0% YoY, packaged food at 7.3% YoY and personal care at 0.9% YoY.

Paint industry has likely grown in low-mid-single digits in volume terms in July-Aug’23 and dealers are expecting strong Sept-Oct’23 due to favourable base and delayed Diwali in CY23 - that's the insight from our conversations with paint dealers in Mumbai. They told us: (1) There are still no price cuts. Paint companies are permitting trade to generate higher profitability. However, some dealers are partially passing on the excess benefits to consumers.

Key takeaways from our interaction with the Chairman of Panasonic Life Solutions & SA (Mr. Manish Sharma): (1) Domestic electronic manufacturing industry is becoming cost competitive vs global peers and may expand rapidly on conducive policies, (2) white goods and durables segment size is likely to cross USD 11bn by FY25 (CAGR 11% over FY21-25), (3) domestic sourcing in RAC industry has increased multi-fold post PLI-based announcements.

We analyse the progress of CG Power in consumer durables as it completes two years after the launch in H2FY22. We note: (1) It has reached revenue of INR ~4bn and is currently profitable, (2) it has 2%+ market share in fans, 3%+ in pumps and geysers have just been introduced and (3) its products are available pan-India and manufacturing is outsourced. Since CG Power is generating profitability and its product pricing is comparable with peers, we do not model any material impact on industry profitability in the short term.