LG India, Polycab In Focus As Jefferies Flags Demand Upside In Consumer Durables — Check Revised Target Price

Jefferies remains constructive on the Indian consumer durables space, highlighting a favourable medium-term demand outlook across cables and wires as well as air conditioners, even as near-term margin pressures persist due to rising raw material costs and a weak rupee. The brokerage continues to advocate a selective approach, with Polycab and LG Electronics India emerging as its top sector picks.

In its note on Tuesday Jefferies maintained a Buy rating on Polycab India and raised its target price to Rs 9,230 from Rs 8,960, citing a strong structural opportunity in the cables and wires segment.

The brokerage expects 2026 to be a “sweet spot” for the industry, driven by healthy demand from industrial capex and housing, alongside 6–8% price hikes to offset higher copper costs.

Jefferies estimates incremental demand of around Rs 65,000 crore over the next five years, comfortably outpacing incremental supply of about Rs 45,000 crore. This supply-demand imbalance, combined with price hikes implemented during October–December 2025, is likely to support margins and near-term volumes through channel restocking.

The Indian cables and wires market, currently estimated at Rs 95,000 crore, could grow at 11–12% CAGR to reach nearly Rs 1.6 trillion by FY30E. For Polycab, Jefferies pencils in 15–20% year-on-year sales growth in FY27E for the segment.

Within air conditioners, Jefferies sees a recovery opportunity following a weak fiscal 2026, when industry sales declined 15–20% in the first half due to unseasonal monsoons and GST-related demand deferrals. The brokerage notes that historically, excess rainfall rarely persists for two consecutive years during the critical March–May period, while mean temperatures continue to trend higher.

Inventory levels have also normalised to around 45 days from peaks of nearly 60 days earlier, aided by revisions in BEE norms that are helping clear older stock. Against this backdrop, Jefferies expects a normal summer in 2026 to act as a key catalyst for LG India, Voltas and Blue Star, with mid-teens sales growth forecast for FY27E.

Accordingly, Jefferies maintained a Buy rating on LG India, although it trimmed the target price marginally to Rs 1,950 from Rs 1,980, reflecting near-term cost pressures. Voltas and Blue Star also retained Buy ratings, with target prices raised to Rs 1,680 and Rs 2,000 respectively, driven by improving volume outlook and exposure to fast-growing B2B segments.

The brokerage flagged rising raw material costs as a key headwind for margins across consumer durables. Copper and aluminium prices rose 21% and 10% year-on-year respectively in Q3 FY26E, while the rupee weakened around 5% between July and December 2025.

Given that compressors, largely imported, account for 25–30% of an air conditioner’s bill of materials, Jefferies expects a lag in price pass-through, leading to near-term margin pressure in second half of FY26E. However, it estimates the earnings impact to be relatively modest at 2–5% over FY27–28E.

Beyond core appliances, Jefferies highlighted data centres and solar products as emerging growth drivers. Blue Star and Voltas, which provide mechanical, electrical and plumbing solutions for data centres, are well positioned, with data centres already forming about 20% of Blue Star’s order book and expected to contribute up to 30% of Voltas’ projects revenue over the medium term.

Data centres also create incremental demand for power and optical fibre cables, benefiting players such as Polycab. On solar, government-led schemes such as PM Surya Ghar and PM Kusum are driving opportunities across rooftop solar, pumps and related products, with several consumer durable companies gradually building exposure.

On stock calls, Jefferies maintained a Hold rating on Havells and cut its target price to Rs 1,560 from Rs 1,620, citing margin sensitivity to raw material volatility.