Consumer durables sector see moderate H1 despite premium push

Abhishek Law Kolkata | Updated on November 22, 2021

Volume growth in Q3 could see taping due to continue price hikes

Consumer durable companies in India might need to calibrate price hikes as they look at risking volume growth and market share gains, post the festival season. Premium white goods saw good off-take in Q2FY22 and in the run-up to the festival season, but the recovery in the sector overall has been slower than expected.

Even in the entry-level product ranges, critical towards generating volumes, demand was subdued or muted.

Companies indicate there is a resistance in the market to further price hikes and the phenomenon is quite visible in the small appliance category and in entry-level offerings. Till August, consumers were readily accepting price hikes.

A four –five per cent price hike December onwards – on select SKUs (like water heater, geysers) – is expected.

According to Anuj Poddar, ED, Bajaj Electricals, September-demand was slightly sluggish. “When I say sluggishness or dip, or that demand was not as strong as last year, I mean that we have to fight for the demand and the sales. Things weren’t just going off the shelves on their own like a year-ago. So, there was a lot of push happening,” he told BusinessLine.

Brokerage firm Emkay in a recent report pointed out that after volume growth moderation across white goods categories in August and September, the festival season started on a positive note. However, volume recovery for mass and entry-level products continued to remain subdued.

Half Yearly trends

Trends covering H1FY22 suggest room air conditioners have witnessed a 12-15 per cent growth and being amongst the outliers in white goods segment. Refrigerators sales saw a 5 per decline YoY and washing machine sales were down between 5 and 6 per cent, YoY.

On a two-year-basis, room AC volume growth stood at 14 – 15 per cent vs -2 per cent (decline) and a 3 per cent growth in for refrigerators and washing machines, respectively. Additionally, the RAC segment’s realisations remained flat vs 4-7 per cent improvement in the case of refrigerators and washing machines.

The AC industry’s revenue growth has outpaced volume growth in H1FY22, while it lagged on a 2-yr CAGR basis. The improvement in realisations for ACs (0 – 4 per cent) was lower than that of WMs and refrigerators across comparing periods.

“Across categories, industry volumes in H1FY22 contracted by 2-14 per cent (2-yr CAGR), pointing to a slow recovery,” Emkay’s report said where it pointed out that except for Samsung, Haier, and Voltas, all other companies have underperformed industry volume growth-wise.

Q3 Outlook

Interestingly, Q3FY21 was seen as a good period by the industry and channel checks, as numbers suggest, at 30-50 per cent volume growth across categories.

This year though volumes could very well come under pressure. While companies had stocked-up to avoid supply chain disruptions, the raw material cost rise is likely to put stress on margins, say analysts.

In Q2 some big players had not hiked prices to that extent as they sought to protect market share. However, all that could change in October – December quarter and post that.

Price increases effected in the last nine months and mix improvement would contribute 8 - 10 per cent to revenue growth in Q3FY22 (Oct-Dec).

Published on November 22, 2021

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