Pent-up demand, coupled with work-from-home provisions, will sustain the strong revenue traction of the consumer durables sector in the coming quarters.
Besides, improving housing activities and resumption of Capex will support this trend.
“Leading companies have taken price hikes to pass on the raw material inflation, while restoration of operational costs will be compensated for by op-lev. Hence, the EBITDA margin will remain healthy in the coming quarters,” HDFC Securities said in a report.
As per the report, the earnings potential will sustain the rich valuations, while market share gain will be the key monitorable for stock performances.
“Most categories have seen recovery post the easing of lockdown restrictions in June 2021. Both ‘B-B’ and ‘B-C’ are seeing strong traction, led by healthy underlying demand, with category leaders gaining market shares,” the report said.
However, ‘B-B’ was a drag in FY21 even though leading companies could deliver healthy growth in FY21 due to a strong ‘B-C’.
“B-B, however, seems to have picked up in Q1FY22, is in a good shape, and expects to sustain the momentum during FY22. Our channel checks suggest strong recovery in June 2021 for electrical and cooling product categories,” it said.
Nevertheless, revenues of most companies are expected to fall by 15 per cent in Q1FY22 versus Q1FY20 as compared to the 50-60 per cent YoY decline in Q1FY21.
“Our checks also suggest that recovery is strong in July too and can sustain in the coming quarters,” the report said.
“This improves our confidence in our earnings estimates and we expect leading companies to be able to sustain the earnings show,” it added.