New Delhi : The S&P BSE Consumer Durables index continues to be in a downtrend, down nearly 12% since September highs. Weak consumer sentiment and sluggish demand have been the main reasons. After a soft September quarter, the December quarter also did not see much pick-up in demand and hopes of some respite from festive season sales were dashed as demand remained weak and disappointing.
Analysts said the increase in prices of products to offset inflationary pressure has impacted demand, while rising inflation has also put pressure on discretionary spending of consumers. Besides, rural demand remained unsupportive and has been another major factor contributing to the weak sales.
Analysts said weakness in demand was witnessed in durables as well as in small electrical appliances, though a sharper impact was seen in durables.
White goods sales witnessed significant pressure, while AC segment value decline is expected to be around 20%, said Harshit Kapadia, analyst at Elara Securities (India) Pvt Ltd. Cooling products like air-conditioners not only witnessed seasonal weakness but also channel inventory. Analysts said it also remained at a higher level. For fans, the change in energy ratings (BEE ratings) that came into effect from January 1 put further pressure on sales.
An uptick in demand is awaited in the current quarter. According to Kapadia, for AC, channel inventory still remains high. Analysts believe that an uptick in sales with the onset of summer season will be the key to boost prospects and if the cold weather in north India continues till February, it is likely that sales pick up in the coming quarter itself. Might be possible. Improvement in fan sales is also being monitored.
Analysts said the companies are likely to continue to benefit from Crompton Greaves Consumer Electricals’ consolidation of the acquired portfolio of Butterfly Gandhimathi Appliances as well as long-term initiatives and cost leadership, which will boost profitability in the near term. However, weak rural demand is not favorable for Bajaj Electrical in the near term, although analysts see a marginal improvement sequentially. Havells is benefiting from Lloyd’s ramp-up, healthy growth from cable business and expansion of distribution network.
Among AC manufacturers, Voltas share price witnessed significant correction during 2022. Valuation – The market share of the driver room AC segment came under pressure and near-term margin guidance by the company was well below consensus expectation, leading to correction in share prices. According to analysts at HSBC Securities & Capital Markets (India) Pvt. Ltd.
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