Demand for air conditioners shot up in the April-June quarter due to soaring temperatures, which may cause consumer durable companies to see strong toppling growth.
JM Financial said in its report that companies witnessed the highest growth ever in room air conditioners (RAC) on the back of a strong season, and improvement in demand for refrigerators.
“In small appliances/electricals, fans despite a strong summer have grown by only 10-15 per cent in volume due to excessive heat,” the brokerage said.
It also said companies have taken a price hike of around 3-5 per cent, which will also help in overall improvement in realisation and margins in July-September.
Prabhudas Lilladher also said in its report that brands in the RAC segment have taken price hikes and the segment also benefited from low inventory in the channels, which were particularly in favour of Voltas and Lloyd.
“We expect our consumer durables universe to register sales/EBITDA/PAT growth of 14.5 per cent /21.0 per cent /20.6 per cent year-on-year (Y-o-Y) in 1QFY25,” the domestic brokerage said in its report.
It added, “We anticipate Polycab, Havells, and Voltas to outperform, while Bajaj Electricals may underperform in sales. In terms of profitability, Havells and Voltas are expected to outperform.”
Nuvama Institutional Equities said in its report that the surge in demand for cooling appliances in the quarter comes after several years of weak demand. “Directional growth improvement hereon is likely as this quarter marks an inflection point for consumer durables,” it added in its report.
It also stated that in its channel checks in the quarter, “the industry is overwhelmed with a sales surge in the wake of the heatwave. Cooling appliances grew 30-40 per cent during March-May. Other categories grew too and kept the momentum upbeat (refrigerators up 20 per cent Y-o-Y). Soaring demand caused supply shortages in a few RAC models.”
The brokerage also said in its report that according to industry body CEAMA (Consumer Electronics and Appliances Manufacturers Association), volume growth in cooling appliances was robust over March to May, led by sales of ACs and air coolers. The association anticipates 14 million RAC sales in 2024, implying volume growth of 27 per cent Y-o-Y.
The report also added that notably, this season, tier-3, -4, and -5 towns also rebounded after years of decline. The speaker shared that March-May accounts for a major portion of annual sales: 60 per cent for ACs and 40 per cent for other consumer durables.
Prabhudas Lilladher also said in its preview note on the sector that the fans segment did not see a significant rise in demand due to the transition from fans to coolers during the quarter.
“However, the companies announced a price hike in the fan segment. The lighting segment continues to face challenges in the B2C segment, while B2B/B2G continues to see strong traction. We expect companies to report double-digit growth in the fast-moving electrical goods (FMEG) segment over the low base of the previous year same quarter,” it said.
It also witnessed in its channel checks that Voltas, Daikin, and Hitachi are consistently mentioned as the most selling brands. 1.5-ton models, especially 3-star inverters, are the most popular across brands.
First Published: Jul 17 2024 | 7:56 PM IST
