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MOSL: Morning India (2/September/21): 1. Consumer Electricals (Demand scaling back; commodity costs remain elevated); 2. Automobiles (Volume numbers); 3. Eicher Motors; 4. EcoScope (a. Monsoon Weekly; b. GST up

MOrning India (2/September/21): 1. Consumer Electricals (Demand scaling back; commodity costs remain elevated); 2. Automobiles (Volume numbers); 3. Eicher Motors; 4. EcoScope (a. Monsoon Weekly; b. GST update)

 

Today’s top research idea

Consumer Electricals: Demand scaling back; commodity costs remain elevated

• Post June'21, 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.
• The 2-year revenue CAGR for Cables and Wires stood relatively better than other categories, while market share gains for the Top 3-4 players over the last couple of months in Fans and Appliances have aided growth in the ECD segment. RAC sales took a major hit owing to washout summer season, while other white goods categories fared better due to non-seasonality.
• With commodity costs still elevated, margins are expected to be under pressure in 2QFY22 for various players, especially in the White Goods category. Any incremental price hikes in white goods could act as a catalyst for the stock.
• For RACs, while the channel inventory was normal, various companies reported elevated raw material inventory levels. This could prove beneficial in case commodity prices rise further.
• ORIENT remains our top pick in the Electricals segment, with TP of INR435 (45x Sep'23 EPS). Whirlpool (WHIRL) is our top idea in the White Goods space as it offers the best risk-reward matrix at present (TP: INR2,650; 50x Sep'23 EPS). We have a Buy rating on CROMPTON and maintain Neutral on HAVL and VOLT. We upgrade BLSTR to Neutral (from Sell) as it provides a limited downside post the underperformance with respect to Nifty (>25%).

Piping hot news

Non-bank lenders eye electric vehicle financing to grow business

Non-bank lenders are eyeing the electric two-wheeler space to grow disbursements. Shriram City Union Finance is tying up with Ola Electric which recently unveiled electric scooters ranging upwards of Rs 1 lakh. Hero Electric also partnered with two-wheeler life cycle management company Wheels EMI for offering easy financing options to customers.