Consumer Durable Q1 Results Review - Margins To Improve In Ensuing Quarters: Dolat Capital

Dolat Capital Report

During April-May 2023 consumer demand was soft across categories (barring cable and wires) due to unseasonal rains and inflation. June saw demand recovery leading to normalization of channel inventory.

B2B business continued resilient performance led by infrastructure and real estate activity. Gross margins improved with stability in commodity prices and better product mix.

However, Ebitda margins of most companies continued to remain under pressure, due to insufficient price increases and normalization of advertising and promotion spends.

Our view

Upcoming festive season is the key to watch for boost in demand, for consumer appliances. Premium fans segment will continue to gain with increase in replacement demand.

Demand environment in cables and wires continues to remain strong, healthy order book and strong industry tailwinds should augur well for electrical manufacturing services companies. Price increase in fans is likely, due to higher BEE related costs and aggressive discounting in Q1 FY24.

We expect margins of consumer durable companies to improve in ensuing quarters with softening of raw material costs, and better operating leverage.

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