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Healthy W&C momentum, while RAC lags

W&C companies under coverage continue to see healthy growth due to improved realization aided by volume growth. Exports are expected to remain flat in Q2FY26. However, FMEG segment was impacted, mainly in seasonal products, due to the extended monsoon, though the onset of festive demand provided some relief. Demand for fans was steady with no major moment in the inventory. RAC companies are likely to witness a revival in demand with GST rationalization. We expect our consumer durables universe to register sales/EBITDA/PAT growth of 10.6%/18.6%/16.2% YoY in Q2FY26. Furthermore, we anticipate KEI and Polycab to outperform, while Voltas to underperform in sales. In terms of profitability, Polycab and RR Kabel are expected to outperform.

We continue our positive view on W&C companies given the healthy domestic demand, expanding market opportunities, and favorable industry trends in both domestic and export markets. KEI continues to be our top pick.

* W&C momentum continues: W&C companies under coverage are expected to sustain volume growth, supported by healthy demand across the sector. Cables continued to witness strong momentum driven by industrial and infrastructure demand, while wires saw inventory build-up amid higher copper prices (Cu up 3.9% & Al up 2.9% in Sep’25). Cable are also benefiting from rising government and private capex in power and infrastructure projects. We estimate Havells/ Polycab /KEI/RR Kabel to see W&C revenue growth of 18.0%/19.7%/26.8%/16.5% YoY in Q2FY26.

* Gradual recovery in FMEG segment: FMEG segment saw moderate growth, supported by the onset of the festive season and pre-festive stocking. Small and large appliances segment experienced moderate demand, while fan segment continued to see a slowdown due to the extended monsoon. We expect coverage companies to report 2.2% YoY growth in FMEG segment.

*  Weak quarter for RAC segment: Coverage companies are expected to report 17.3% YoY decline in RAC segment in Q2FY26, impacted by extended rains, muted primary sales, channel inventory build-up, and deferred purchases in anticipation of the GST cut. Voltas’ UCP and Lloyd expect sales to decline by 17% and 18% YoY, respectively, with reduction in margins.

* Consumerware & stationery to drive growth: CELLO is expected to report 13% growth in its consumerware segment, while writing instruments and stationery segment is likely to see export-led recovery with 6% YoY growth in Q2FY26.

*  Key changes in ratings/TP: As we roll forward our TP to Sep’27E and introduce FY28 numbers, we upward revise our TP for Polycab, RR Kabel and KEI. Further, we upgrade our rating for RR Kabel and CELLO to ‘BUY’ from ‘ACCUMULATE’.

Cello World - Visit Update

We visited CELLO’s new glassware facility in Falna, Rajasthan, and discussed the Consumerware segment outlook with management. With the ramp-up of the facility and recent additions of vacuum insulated flasks and stainless steel vessels, along with export growth in Writing Instruments. Commissioning of Falna increases total Opalware & Glassware capacity to ~45,000 tpa (Daman & Falna).

? Falna glassware facility - Enhancing self-reliance and growth: The company has commissioned a glassware manufacturing facility in Rajasthan, operational in a phased manner from 16th Mar’24, with a total capacity of 70tpd (around 18,000-20,000tpa). The facility is currently operating 4 press lines and 1 press-and-blow line, with utilization at 60%, which is expected to reach 80% by Q3/Q4FY26.

? Expansion of other consumerware products: Falna facility will expand production to include plasticware and steel bottles. 2 steel bottle lines and 1 plasticware line are planned, with a dedicated capex of Rs1–1.2bn.

? Consumerware segment to benefit from ADD: ADD on imports is prompting CELLO, the segment’s second-largest importer, to partner with domestic manufacturers as local capacity ramps up. This move positions CELLO to gain market share amid rising demand.

? Initiatives to reduce working capital days: Working capital increased from higher steel inventory, extended receivables, and faster supplier payments. Inventory and receivable days are expected to normalize, while creditor days remain lower. Overall, easing working capital should support stronger cash flows.

Voltas - Analyst Meet Update

We attended VOLT’s analyst conference call wherein management outlined plans to regain cooling sales momentum, expand into full-stack appliances, and drive cost savings for sustainable margins. RAC demand recovery is expected to be soft due to GST changes and Q1FY26 inventory buildup. VOLT leads RAC (18% market share) and aims to top air coolers, with price hikes in 3- and 5-star RAC from Jan’26.

? Q2FY26 revenues were muted due to 2–3 months of channel inventory and a GST-driven 5-week purchasing window.

? Recent GST cut on RACs and dishwashers is expected to boost demand, supporting a sequential recovery in Q3–Q4FY26.

? VOLT leads RAC (~18% market share) and aims to top the air cooler segment by Q4FY26, while commercial AC is set to grow 15–20% annually

? Price hikes in 3- and 5-star ACs are planned from Jan’26, with primary sales expected to rise in Q3FY26.

? Cost optimization and outsourcing of ~70% of key sub-assemblies will enhance margins from Q4FY26 onwards

? Expansion across modern trade, regional retail, and e-commerce will complement traditional channels for incremental market share gains

Bajaj Electricals – Management Meet Update

We recently met the management of Bajaj Electricals (BJE) to gain insights into the Consumer Products (CP) and Lighting Solutions (LS) segments, focusing on channel inventory levels, festive demand outlook, and cost-optimization initiatives aimed at improving plant utilization. The management highlighted that new product development (NPD) is expected to contribute ~40% to total revenue by FY26, supported by R&D spends of ~2% of revenue

? Weak summer caused higher inventory in fans and coolers. Premium and BLDC fan sales are strong, while economy segments remain weak. Cooler inventory is expected to normalize, with strong bookings for the upcoming season.

? Plant underutilization are from high labor and supply chain costs, with most suppliers in the North and all facilities in Maharashtra.

? Capex of Rs1.4bn is planned for NPD, and in-house production is set to rise from ~20% to ~40%, with CP and LS segments also increasing internal contributions.

? E-commerce contributes 14–15% of CP sales, though GT remains the key focus. company plans BTL marketing over discounts to boost visibility, with NPD—driven by core launches and ~2% R&D spend—targeted to contribute ~40% of FY26 revenue ? Management aims to increase EBIT margins by 3–4% over three years, shifting focus from lamps to ceiling lights, outdoor lights etc

? Company has forayed into low-voltage switchgear, targeting the residential sector. Initially, it will follow an outsourcing model

? Contribution from rural markets (population < 0.1mn) has been steadily increasing and accounts for 30–35% of revenue, up from ~25% 5 years ago

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