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Emkay Global Finds Double Digit Volume Growth In ACs, Refrigerators Continues

White goods like refrigerators, washing machines and air conditioners (ACs) seem to be bucking the trend even as the overall economy struggles. According to channel checks done by Emkay Global Financial Services, volume growth in demand for ACs and refrigerators continues to be in double digits even after moderating. Demand for washing machines has seen a rebound.

“On the expected lines, demand for ACs and refrigerators has moderated following the strong summer season. However, both the categories continue to record double digit growth in lean season. AC demand remains healthy with low inventory levels. Washing machines demand has started to see a pick-up, driven by increased demand for the fully automatic machines,” analysts Naval Seth and Aakash Fadia said in a report on 11 September.

They, however, said that brands selling ACs are still vary of increasing prices and continue to offer discounts and cashbacks. Inverter ACs remain the preferred choice of customers owing to their better energy efficiency. Secondary sales for most companies have been higher than the primary, resulting in low inventory levels across the channel.

Primary sales are the sales from a manufacturing company or national supplier to a city, state, region distributor. In secondary sales a distributor invoices the product to a retailer.

Analysts at Emkay see low inventory levels and sustained demand along with upcoming festive season driving strong primary sales for brands in AC segment.

In the refrigerator category, pricing continues to remain under pressure. “Samsung after effecting price hikes in May has been resorting to a series of price cuts. Products are now available at Oct’18 prices. Haier after raising prices of direct cool refrigerators in Jun’19 has rolled back the hike and products are now available at 3% lower than Jun’19 levels. Price cuts in direct cool refrigerators are to the tune of 0-5% from June levels,” the report said.

However, the brokerage sees higher competitive intensity limiting price hikes and thus restricting margin expansion of consumer durables in near future. Emkay has an overweight stance on Dixon Technologies and Amber Enterprises, while it is equalweight on Voltas with target prices of Rs. 2,834, Rs. 1,072 and Rs. 604 respectively. It is underweight on Whirlpool and Havells with target prices of Rs. 1,293 and Rs. 611, respectively.

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