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Our interaction with the dealers of consumer durables and electrical suggest post the festive season of Diwali in early November, demand has been subdued with slow start to the winter products. In the month of November demand has been sluggish with slow start to the winter products. Few brands have taken token price increase of 1- 2%. Premium products continue to see higher traction on back of no-costs EMI offered by the brands. Moreover, festive season of Diwali saw satisfactory demand with high single digit growth led by RAC and refrigerators, while washing machines grew in mid-single digit. Channel inventory continues to be normalized as dealers and retailers are yet to place the orders for the summer products, which should start from December. On the electrical side agri pumps continues to see strong growth with increasing demand for the solar pumps. Dealers are optimistic that winter products inventory that they are carrying will be liquidated in the ensuing months as winter sets in, while dealers and distributors are very optimistic for the summer products and prospects of strong summer season given the IMD’s prediction of mild winter. We continue to maintain our positive stance on the sector with demand continuing to trend better and increasing ASP with enhanced sales of the premium products. Havells, Crompton and Voltas will be our preferred pick from the electrical and durables space.

* Demand for winter products in November has been sluggish on back of delayed winter:

Winter products viz. geysers and room heaters has seen slow start with November registering yoy decline. Lower demand has been attributed to weak demand particularly from the northern region where temperatures continued to be higher than normal. Dealers expect demand to recover in month of December and January as temperatures have started dropping from last week of November and there has been positive momentum in last 2-3 days of November.

* Cables and wires continue to maintain low to mid-teens volume growth:

Cables and wires have continued to register low to mid-teens volume growth in month of November. On the pricing front there was no revision as copper prices continue to fluctuate in the narrow band, hence volume growth should largely translate into the value growth.

* Large appliances better off with high single digit to low double-digit growth:

large appliances have registered high single-digit to low double-digit growth led by higher demand for the premium products. On the volume front the growth as per dealer checks growth has been ~6-7%. RAC is witnessing continued double digit volume growth, while side-by-side and French door refrigerator continues to be preferred increasing the ASP and driving value growth.

* Market-buzz:

LG has seen strong performance during the festive season especially in large screen LED television and side-by-side refrigerators where it has registered double digit growth. As per some dealers LG is expected to launch subscriptionbased model in India, on the similar lines that has been successful in countries like Malaysia and Thailand where they derive ~20% of the revenue in those country. Other brands that are doing well are Voltas and Daikin in the RAC space.

* We maintain positive stance on the sector:

we remain positive on the sector as we believe current low demand is expected to transient as there some fatigue is expected after record summer sales and festive season. We expect demand to get back on track from Q4 as focus shifts on summer products and winter is expected to be mild as per IMD report.

* Our view:

Given positive festive sentiments being echoed by dealers for upcoming summer and normal inventory levels, we revenue strong Q4 growth for the industry. Our preferred sector picks include Voltas, Havells and Crompton.

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