Consumer Durables share price target

Our primary research (survey) indicates current EOSS (end of season sale) has kicked off two weeks early (likely) due to general business slowdown. We believe higher discounts are reflective of relative stress in underlying inventory, and hence, may be a leading indicator of business performance in near term.

We note most durable companies are introducing a new brand via acquisitions or new launch. We believe the strategy of sub-segmentation to be DCF accretive and note (1) new brand will allow to expand product portfolio in different segments such as kitchen.

Grasim has introduced painting services in Mumbai and Pune markets under the brand ‘Sparkle’. In our opinion, it will allow Grasim to develop consumer insights. As of now, Grasim is likely to use products from competing companies.

Post our interaction with companies and channel partners, we note (1) the revenue growth is still muted in Apr-May’23. Unseasonal rains in North India in Apr’23 has impacted off-take of summer products, (2) the trade schemes as well as consumer offers are higher than earlier quarters.

Wood panel companies under our coverage reported a mixed bag of operating performance in Q4FY23 with Century Plyboards (CPBI) surprising positively. Plywood and allied segment revenue for CPBI and Greenply Industries (MTLM) grew 18.4% and 3.1% YoY, respectively (4-year CAGR of 14.5%/5.6%).

We note players like Astral, Pidilite and J K Cement have entered the paints sector and strengthened their offerings in FY23, and Grasim is also on track to launch in FY24. The war in paints sector to likely to commence soon, in our view. As they say, there are no absolute winners in any war.

We present I-Sec’s Vulnerability Index in Paints (in the context of likely increase in competitive intensity). Kansai Nerolac with a score of 2.3 appears the least (likely) impacted, whereas Indigo has a score of 3.6 (Akzo Nobel 2.6, Asian Paints 2.8, Berger 3.0).

Consumer sector overvaluation in May’23 is at 27% (per I-Sec Consumer Momentum Indicator (ICMI)) versus 22% in Dec’22. Though Staples' demand environment continues to be (relatively) muted, there have been sequential improvement in demand (especially in rural) over the quarters in FY23.

This is NOT a template-based results review report (of aggregate performance, charts et al). This is a portfolio manager summary of the under-appreciated, yet very important takeaways from the 4QFY23 results season. We decipher management comments and add the layer of our views.