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HDFC Securities Institutional Equities
Our appliances coverage universe is expected to deliver revenue YoY/three-year compound annual growth rate (excluding Butterfly Gandhimati Appliances Ltd. acquisition) of 13/16% in Q3 FY23 (versus 7/11% in Q3 FY22 and 6/12% in Q2 FY23).
Q2 FY23 was marred by a variety of reasons like commodity-led destocking, an unfavorable base, negative oplev and slow infra activities led by extended monsoon.
We have observed that some of the headwinds have eased out in Q3 and thereby expect better delivery in Q3 after the washout show in Q2. Some business-to-consumer categories (especially white goods) have witnessed tepid demand after the festive season.
However, fans have benefited by rating change-led pre-buying. Channel partners have stocked up the non-rated fans in Q3 as manufacturers will not be able to sell after Jan 01, 2023 onwards. Hence, primary sales are expected to be strong for Q3 for fans.
We do not change our H2 FY23 numbers considering end-consumer demand will not alter due to pre-buying. However, our checks are suggesting that the price difference between non-rated and rated fans can be ~10-15% which may increase our fan revenue growth assumptions for FY24 (we await more clarity). Besides, B2B/B2G demand is sustaining a healthy trend.
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