ICICI Securities, a domestic brokerage company, has picked up the white goods and durables sector, with a total of 9 stocks to watch right now. Amber has a Hold rating, Bajaj Electricals has an Add rating, Crompton has a Buy rating, Dixon has a Hold rating, Havells, Polycab, TTK Prestige has a Buy rating, and V-Guard and Whirlpool have an Add rating by the brokerage.
The brokerage has also highlighted the key takeaways from the FY21 annual report of Usha International. ICICI Securities has claimed "Usha which has strong presence in fans and sewing machines reported revenue CAGR of 6.4% over FY15-21. However, its revenues have declined at CAGR of 0.3% over FY19-21, indicating likely loss of some market shares, in our view. Consumer durables account for 85%+ revenues in FY21, whereas Pump sets, Motors and Auto parts accounted for rest of the revenues."
ICICI Securities has said "The company also generates majority of revenues in India. It has reduced its net working capital days from 38 in FY15 to -7 in FY21, leading to lower interest costs and better return ratios. However, we note Usha has still lower EBITDA margins than peers. We believe Usha has strong competitive advantages such as the brand Usha, and established distribution."
The brokerage has noted that "Considering strong return ratios, growth potential and low penetration levels, we remain positive on the white goods and durables sector. We also expect migration from unorganised to organised sector to steadily generate value. Havells India and Crompton are our top picks. Key risks: Higher-than-expected rise in crude oil prices, delay in price hikes to protect margins, and irrational competition."
Top Stock Picks From White Goods & Durables Sector
For the below stocks, the brokerage feels better-than-expected gross margins due to correction in input prices as the key upside risk and unexpected irrational competition due to deceleration in general consumption demand as well as steep inflation in input prices as key downside risks.
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|Source: ICICI Securities. Data as of March 31, 2022|