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Executive Summary

The Indian consumer durables industry is well poised to register strong growth rate led by structural growth drivers including rapid urbanization, increasing affordability and increased government thrust on infrastructure and housing. Despite the strong growth momentum in the last decade, the consumer durables industry still remains one of the most underpenetrated industries in India. The pandemic may have slowed the growth momentum for the industry in the last two years, however, it is once again regaining momentum backed by overall economic recovery. The organized players have come out stronger during the pandemic given their strong financial position and have managed to further strengthen their foothold in the consumer durables industry. We believe consumer durables industry has huge potential to grow in India given the favourable demographics, nuclearization of families, and increasing aspiration. Moreover, with rising disposable income coupled with companies constant focus on premiumization through value addition would aid margin improvement. The government focus on Make in India to promote domestic manufacturing would not only aid demand domestically, but also provide fillip to huge export opportunity which at present remains largely untapped for these players. Therefore, positive outlook on the industry and organized players strong brand presence and wide distribution network would aid continuous market share improvement for these players in key categories. The recent correction in commodity prices like Copper and Aluminium also alleviates margin concern for the industry. We initiate coverage on the consumer durable sector with a Buy rating on Crompton Greaves Consumer Electrical, Polycab, Voltas and Whirlpool of India and Hold rating on Havells.

India’s Consumer Durable Industry - An Enduring Growth Story

The Indian consumer durable market can be segregated into two key segments i.e white goods and consumer electricals. White goods largely comprises of household appliances like Air-Conditioners, Refrigerators and Washing Machines. Consumer Electricals comprises of household appliances including fans, lighting, mixers & grinders, and other appliances. While the industry demand is largely dominated by urban areas, rural and tier 2, 3 cities have shown strong growth potential over the last few years led by increased penetration of brands and strong focus of government on rural electrification and housing for all. We expect the growth momentum to remain strong for both segments given the under penetration of consumer appliances in India, rapid urbanization, rising disposable income, faster shift towards organized players and increased thrust of government on infrastructure and housing for all. Moreover, increased focus of government on domestic manufacturing through Make in India and PLI Scheme provides a huge export opportunity for companies in this space.

Key Growth Drivers

Rapid urbanization and rising income levels

India’s vast population of more than 121 cr and favourable demographics bodes well for the Indian economic growth prospects. Moreover, rising income levels, increasing job opportunities and aspiration of better standard of living has resulted in rapid pace of urbanization which is currently at 34%. This is expected to rise to further to 40% by 2030E. India’s per capita income has also seen a steady rise growing at ~9% CAGR over FY11-21. Therefore, rising income levels, favourable demographics and rapid urbanization would aid demand for housing and infrastructure thereby propelling growth for the consumer durable industry.

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