Festive season lights up consumer durables sector

livemint.com:

World Cup provided a major boost. The preference for premium products continued, with more demand for, say, double-door refrigerators than single-door ones. Washing machines, televisions and fans also saw higher demand at the top end.

In the case of fans, companies such as Havells India stand to benefit as they cater to the premium segment, where customers are less price-sensitive. In general, the premiumisation trend augurs well for margins. To be sure, there wasn’t much of an increase in demand for fans during the festive season, largely owing to seasonality.

Air conditioners were another case in point. Even so, demand for air conditioners was steady in October thanks to high temperatures. In a recent interaction with Dolat Capital Market, Orient Electric Ltd’s management said it expects its fans portfolio to be subdued in Q3 owing to a high base and the new BEE rules, and because demand for fans generally doesn’t spike during the festive season.

But Orient foresees increased momentum in Q4 with the summer offtake. The company also plans to hike prices by 2-5% in December-January to increase margins. Dull demand for fans and pressure on margins have pushed Orient’s shares down 17% so far this year.

Meanwhile, the cables & wires category is expected to outperform most others, mirroring the trend in Q1 and Q2. The outperformance is despite a sequential, albeit slight, fall in copper prices (about 3%) and comes on the back of strong demand in the business-to-business sector and solid infrastructure spending. Companies that stand to gain from this include Polycab India Ltd and KEI Industries Ltd.