Consumer Durables share price target

Q3 to remain lacklustre on muted demand post festive season and little scope for price hikes

Paint dealers expect price cuts from paint companies over the next 2-3 months with fall in crude oil prices. They want to work with minimum possible inventory.

Paint dealers indicated that primary sales were impacted materially (declined for some dealers) in Oct-Nov’22 as there was trade up-stocking in base quarter due to ~22% price hike, however, consumer off-take has remained largely stable - that's the insight from our conversations with dealers in Mumbai.

We expect the white goods and durables sector to report weak revenues in Q3FY23E due to: (1) post Diwali slowdown in consumer offtake due to steep price hikes, inflationary pressures and higher interest rates.

The Ministry of Finance has rolled back the export duties imposed on steel in May’22 (Link), to likely promote exports from India. Higher demand for steel products from International markets might shoot domestic steel prices upwards.

New Gujarat electronics policy aims to build an ecosystem for electronics manufacturing in India and enable import substitution

OUR TOP PLAYS Positive: Polycab India, Dixon Technologies Negative: Symphony Ltd

Price hikes of 20-25% over the past 18 months, ~200bps increase in interest rates as well as higher electricity rates have resulted in 13-28% increase in the cost of ownership of white goods.

Most dealers indicated volume growth is likely to be in mid-single digits in Q2FY23 due to large base (Sept’21) and price hikes (in Jul-Sep’22).