The demand for consumer durables across large and small appliances remained weak during first quarter of FY24 yet again. For seasonal products, such as air conditioners and fans, unseasonal rainfall further impacted secondary demand. The same held true for refrigerators.
For other products, while demand was weak, companies offered discounts or incentives to push primary sales and thus, inventory levels have inched up as well, according to dealer surveys by Nomura.
For air conditioners, volumes are likely to be flat year on year in the June ended quarter and industry expectations are for a revival during the festive season in the December ended quarter. However, the industry growth is expected to be slower at about 5 percent in FY24, unless there is a meaningful pick up in the last quarter of the year. Price hikes have remained elusive and competitive intensity remains high from Daikin and Lloyd. Correction in commodity prices can support margins, though partly offset by discounts.
In the wires and cables segment, demand remains healthy partly offset by a modest 5 percent quarter on quarter decline in copper prices. Furthermore, the growth in demand for switches is expected to benefit Havells India in Q1FY24.
The older non-rated fan inventory is largely over and hence, the sales are currently skewed towards Bureau of Energy Efficiency (BEE) rated fans with a low star rating. Nomura expects Crompton Greaves to report a decline in revenues led by a weak performance in the electrical consumer durables segment, along with Butterfly Gandhimathi Appliances.
For Voltas, the primary AC volumes is expected to decline resulting in flat revenue growth in UCP (Unitary Cooling Product) division. Blue Star in an interaction with CNBC-TV18 said the actual sales of room ACs in first quarter was much lower than its expectations. "With the early onset of summers this year, Blue Star expected 25 percent year on year growth in room air conditioners business for April, but the actual demand stood much lower. Similarly the month of May witnessed marginal growth in demand year on year, compared with the expected 20 percent growth", said B Thiagarajan, MD at Blue Star.
Polycab India and Blue Star have announced their Q1FY24 result dates as July 18 and August 3 respectively.
The Nifty Consumer Durables index is trading 0.4 percent lower at 10:30 am on July 10 with 7 out of 15 stocks in the red.
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