Home Decor Industry Continues To See Uneven Performance, Says Nuvama
The brokerage attributed slow growth of the tiles players in Q1 to elections, while higher timber cost impacted the wood panel makers.
Wealth management firm Nuvama highlights a continued uneven performance in the home décor industry, driven by fluctuations in market conditions and sector-specific challenges, after the industry delivered mixed first quarter results.
In its Q1 FY25 results review report for the home décor sector, the brokerage projected a strong outlook for pipe stocks while predicting uncertainty for the wood panel companies.
The global brokerage highlighted that the tiles players faced a slow growth in Q1 due to general elections, while higher timber cost impacted the wood panel manufacturers.
Overall, Nuvama recommended "buy" ratings for Venus Pipes, Somany Ceramics and APL Apollo Tubes.
Uncertainty For Wood Panel Companies
According to Nuvama, the wood panel sector has struggled in the quarter, showing a decline in both Ebitda and profit after tax by 8% and 27% year-on-year, respectively.
Nuvama attributed this downturn to rising timber prices and increased competitive pressure. Despite a 13% growth in top line revenue due to new capacity additions, the sector’s profitability has been significantly impacted, the brokerage said.
Strong Performance By Plastic Pipes
On the other hand, the plastic pipe segment has shown strong growth. Companies in this sector reported a notable 21% increase in Ebitda and a 27% rise in PAT year-on-year, albeit from a low base.
Nuvama said that this growth reflects strong demand in the real estate and infrastructure sectors. However, with PVC prices experiencing volatility, Q2 FY25 may face challenges due to de-stocking and inventory losses.
Nuvama identified Venus Pipes, Somany Ceramics and APL Apollo Tubes as the top picks in the sector.
Modest Improvement In Tiles Sector
The tiles sector, hampered by election-related slowdowns, saw only a 2.5% rise in top line growth while Ebitda fell by 2% year-over-year.
Companies in this space have resorted to discounts and schemes to capture market share, impacting profitability. Despite these efforts, the sector’s performance remains under pressure.
Sector-specific Challenges
The global financial management firm said that plastic pipe companies faced margin pressures as they competed fiercely for market share, passing on inventory gains to maintain their competitive edge.
Tile manufacturers struggled with lower margins due to increased marketing and distribution costs amid a demand slowdown.
Plywood manufacturers, however, managed to stabilise their Ebitda margins by passing on high timber costs to customers. Medium-density fibreboard players recorded their lowest margins in three years due to high timber costs and an oversaturated domestic market.
Nuvama Outlook
Looking ahead, the Nuvama report suggested a preference for the pipes sector, driven by strong demand across various segments.
The tiles segment is expected to recover as projects near completion and exports improve.
However, the wood panel sector is likely to remain under pressure due to high timber prices and oversupply, said Nuvama.
