homeearnings NewsConsumer durables earnings preview: Rural segment under stress as inflation bites during festive season
Consumer durables earnings preview: Rural segment under stress as inflation bites during festive season
Premium categories in the consumer durables sector will continue to fare better versus the mass segments, which are grappling with high inflation and price increases. This means that demand from rural as well as entry-level segments will remain subdued.
The consumer durables sector has been banking on the ongoing festive season. While overall volumes declined in July and August this year, channel build-up towards the end of September was positive and should support growth in the second quarter of the current financial year (FY23).
Channel checks suggest that inventories are now at normal levels. However, rural demand has been hit by steep inflation.
Rural demand and the impact of inflation
Premium categories will continue to fare better compared to the mass segments, which are grappling with high inflation and price increases. This means that demand from rural as well as entry-level segments will remain subdued.
According to Naveen Trivedi, AVP-Institutional Research, HDFC Securities, the pain continues for the rural segment.
"If you look at the last seven-eight quarters and compare the consumer durables side, FMCG side premium segments have done much better than the mass segment," he said in an interview with CNBC-TV18.
Segment-wise performance expectations
With the second quarter being an off-season, air-conditioner sales volumes may not be significant this quarter. Voltas revenue growth is expected at a marginal at 2 percent compared to the same period last year, primarily led by higher realisations in the unitary cooling products division. However, margins could see a contraction.
For Blue Star though, market-share improvement led by distribution expansion and product portfolio revamp over the last year would support the outperformance. The top line of Blue Star may jump 20 percent, with stable margins expected.
Now moving on to the small appliances segment, a slowdown in demand for fans along with continued weakness in pumps would result in sequential revenue decline for Crompton Greaves in its electrical consumer durables division, while, the lighting revenue is expected to witness low-single digit growth.
For other segments like lights and switches, some value growth can be expected. Havells India is expected to maintain its outperformance versus peers, with strong revenue growth momentum in switchgears, lighting, electrical consumer durables.
For contract manufacturers like Dixon Technology, revenue should be supported by volume growth in televisions and washing machines. The PLI-led scale-up in the mobile, telecom and IT segments would also add to the revenue growth.
However, for Amber Enterprises, volumes could be impacted on account of high inventory levels with select brands. The lean period for cooling products is likely to weigh on Amber’s topline.
(Edited by : Abhishek Jha)
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