Consumer Durables, EMS Q2 Results Preview - Soft Quarter; Festive Season A Key Monitorable: HDFC Securities

HDFC Securities Institutional Equities

With Q2 being seasonally the weakest quarter, the demand environment remained impeded by weak consumer sentiment due to inflationary pressures.

As channel inventory ran dry post a sizzling summer season, primary sales of cooling products (more so room AC and air coolers) are likely to support overall industry growth.

While Onam demand (start of the festive season) was below expectation, early trends from Navratri/Dusshera have been encouraging. Sustenance of demand pick-up during the festive season remains a key monitorable.

We expect our consumer durable universe to register a revenue/Ebitda/PAT growth of 11/29/40% YoY (10/14/13% two-year CAGR).

Within EMS, industry tailwinds will continue to support accelerated growth momentum. We expect our EMS universe revenue to grow 76% YoY. However, increasing mix in favour of high-volume low-margin business will lead to a dip in margins over LY, leading to Ebitda/PAT growth of 61/82%.

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