Motilal Oswal Sees Mixed Consumer Durables Demand, Favors LG and Polycab India

Motilal Oswal Highlights Diverging Trends in Consumer Durables, Backs LG and Polycab India

As India’s consumer durables market navigates a mixed recovery, analysts at Motilal Oswal identify key players poised for growth amid shifting consumer preferences.

Festive Season Demand: A Mixed Bag

The festive season in India has traditionally been a key driver for consumer durables, but this year presents a mixed picture. After a slow start during Ganesh Chaturthi and Pitru Paksha, demand surged with the arrival of Navratri, showing a year-on-year growth of 25-30%. However, this uptick is not uniform across all categories, indicating that while some segments are thriving, broader discretionary spending remains subdued.

Category-Specific Insights

Air conditioners have emerged as a standout category, with volumes increasing over 60% year-on-year, largely due to rising temperatures. However, this growth is precarious, hinging on weather conditions. In contrast, the television market has shown resilience, particularly in larger screen segments, which have reported volume growth of 60-100%. Yet, the increase in prices—22-25% due to panel shortages and chip availability—has pressured affordability, leading to deferred purchases.

The smartphone market reflects a similar trend, with volumes down 10-15% but average selling prices up by 35-40%. This divergence highlights a shift towards premium devices, suggesting that while demand is softening, consumers are willing to spend more on higher-value products. Conversely, demand for refrigerators and washing machines remains weak, as consumers prefer to repair existing appliances rather than invest in new ones.

Strategic Moves by LG and Polycab India

Motilal Oswal’s preference for LG Electronics stems from its diversified portfolio and robust premiumisation strategy. The company is expected to maintain a growth trajectory of approximately 20%, driven by strong performances in washing machines and televisions. With a target price of ₹2,075, LG is well-positioned to capitalize on the ongoing shift towards premium products.

Similarly, Polycab India is set to benefit from strong demand across infrastructure and industrial segments. The company reported impressive growth in revenue and EBITDA, supported by a booming domestic cables and wires market. With a target price of ₹10,600, Polycab’s focus on expanding its footprint in high-growth areas like solar inverters and data centers positions it favorably for the future.

Challenges and Opportunities Ahead

Despite the positive outlook for certain companies, the overall market remains challenged by affordability issues. Manufacturers are employing strategies like zero-cost EMI schemes and cashback offers to stimulate sales. However, a sustainable recovery will depend on consumers’ willingness to invest in higher-value products, alongside improvements in product availability and after-sales service.

Additionally, emerging categories such as kitchen chimneys and energy-efficient fans are gaining traction, indicating a shift in consumer preferences. The long-term growth potential lies in premiumisation and innovation, but the immediate outlook remains mixed, contingent on economic factors and consumer sentiment.

Key Highlights

• Consumer durables market shows mixed recovery, with premiumisation driving select categories.
• Air conditioners see over 60% YoY volume growth, while televisions report 60-100% growth in premium segments.
• Smartphone volumes decline by 10-15%, but average selling prices rise by 35-40%.
• LG Electronics and Polycab India identified as key players with strong growth prospects.
• Affordability remains a critical issue, impacting replacement purchases across categories.

Investor Note: The mixed demand landscape in the consumer durables sector suggests that while opportunities exist, investors should remain cautious and focus on companies like LG and Polycab that are strategically positioned for growth amid evolving consumer preferences.