Consumer Durables share price target

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).

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.

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.

The lipstick index is a term coined by Leonard Lauder, former CEO of Estée Lauder, to describe a phenomenon in which consumers tend to purchase more cosmetics, especially lipstick, during times of economic uncertainty.

We visited Raipur (in Chhattisgarh) and interacted with several regional sales managers, area managers and distributors of retail/QSR/FMCG companies to gain first-hand insight on their business (at store level) and evolving competitive landscape.

We estimate paint industry volumes to have grown 8-10% YoY in Q4FY23. We reckon revenue growth = volume growth (interplay of price hikes and discounts). There has been a likely deterioration in revenue mix due to: (i) higher revenue from projects business and industrial paints, and (ii) down-trading.

Q4FY23: Consumer Durables Preview