Dixon, CGCEL: Consumer durable shares gain up to 9% in a range-bound market

Shares of household appliances and consumer electronics companies were trading firm on Wednesday, surging up to 9 per cent on the BSE in the intra-day trade, in an otherwise range-bound market.

Dixon Technologies (India), Amber Enterprises India, Crompton Greaves Consumer Electricals, Orient Electric, Blue Star and Havells India gained in the range of 2 per cent to 9 per cent on the BSE in the intra-day trade.

At 01:41 PM, the S&P BSE Consumer Durables index, the top gainer among sectoral indices, was up 1.5 per cent, as compared to 0.11 per cent decline in the S&P BSE Sensex.

Among individual stocks, Dixon Technologies surged 9 per cent to Rs 3,580.50 in the intra-day trade after the company reported improved operational performance with earnings before interest, taxes, depreciation and amortization (ebitda) margin coming nine-quarter high of 5.1 per cent in the March quarter (Q4FY23). The margin improvement was due to better sales mix during the quarter and cost optimisation measures undertaken by the company.

ICICI Securities believes Dixon reported an encouraging topline growth in Q4. As a result, revenue for FY23 came in at Rs 12,192 crore, in-line with the management's previous guidance. On the margin front, the reported Ebitda margin was better than management's guidance range of 3.8 per cent- 4.5 per cent and is also in pre-Covid level range of 4.5-5 per cent, the brokerage firm said in a note.

That said, while addition of new customers in the mobile segment is imminent, analysts at Emkay Global Financial Services believe slowdown in some key segments will hamper the overall growth of brands, which will see additional impact from Dixon being a B2B supplier.

"Robust margin performance in Q4 is likely to sustain, as Dixon’s share in ODM manufacturing continues to grow. We are building-in the slight cuts in revenue  which are being offset by the existing margin trajectory, FY24E-25E EPS is largely intact (+2.6 per cent in FY24E, while staying flat in FY25E)," the brokerage firm said in result update.

Meanwhile, shares of Crompton Greaves Consumer Electricals (CGCEL) rallied nearly 5 per cent to Rs 278.25 after more than 3 million equity shares changed hands on the BSE via block deal. Around 3.3 million shares, representing 0.52 per cent of total equity of the company, have so far changed hands, the exchange data shows. The stock had hit a 52-week low of Rs 251.25 on April 26, 2023.

CGCEL is among India’s leading fast moving electrical goods (FMEG) companies, present in electrical consumer durables (~69 per cent of revenue) and lighting businesses (~16 per cent of revenue). CGCEL acquired Butterfly Gandhimathi Appliances, which contributes 15 per cent to revenue.

"The company is currently working on stabilizing its pump/light business with competitive pricing, launch of new SKUs and go-to-market (GTM) in lighting segment, which will impact its margin. Crompton has also guided that incremental growth will come from kitchen appliance business of Crompton & Butterfly, lighting business and large appliance business in coming years," analysts at Prabhudas Lilladher said in its result update.

The brokerage firm believes the stock will be range bound in the near-term, considering growth & margin guidance given by management.

However, it is trading at lower valuation and would be good bet for next 2-3 years, considering opportunity of re-rating with management change as Crompton franchise has strong market share in fans and pumps, it added.