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MOSL: CONSUMER ELECTRICALS-Demand scaling back; commodity costs remain elevated

CONSUMER ELECTRICALS: Demand scaling back; commodity costs remain elevated

 

With consumer electrical and durable companies having reported their 1QFY22 results, and post the conclusion of the Onam festival in Kerala, we have analyzed some important trends for the entire sector. Here are the key highlights: 

• Consumer Electricals sees quick scale-up in demand; white goods sales muted: While April-May'21 sales were muted due to the lockdowns, consumer electrical companies posted healthy sales in June'21. While the base year was modest, the two-year revenue CAGR for consumer electrical companies stood flat to -14% - HAVL's core business outperformed with a flat two-year revenue CAGR. For white goods, the two-year revenue CAGR range stood in the range of -10% to -30%, with Room Air Conditioner (RAC) companies affected the most due to the washout summer season. Post June, demand has been robust for electricals, while the real test for white goods would be the upcoming festive season. Note that the recently concluded Onam festival in Kerala was disappointing, perhaps attributable to surging cases in the state.
• Cables and Wires benefitting from copper price surge: Within individual segments, the two-year revenue CAGR for Cables and Wires came in flat for HAVL/KEII*/POLYCAB* (*unrated), as ongoing construction activity despite the lockdowns aided demand (v/s last year's total shutdown). Also, as highlighted in our , the Cables and Wires business tends to benefit from rising copper prices owing to the quick passing on of inflation, coupled with inventory gains. We believe volume growth is scaling back to pre-COVID levels for cables, while price hikes have been strong at 35-40% on account of the surge in copper prices.