HDFC Securities has selected Crompton with a target price of Rs 530 and Orient Electric for a target price of Rs 400 as its top stock picks to buy from the Consumer Durables space ahead of Q4FY22 results. The brokerage has also given "ADD" rating to Havells for a target price of Rs 1,500, Voltas for a target price of Rs 1,325, V-Guard for a target price of Rs 275, Symphony for a target price of Rs 1,200 and TTK Prestige for a target price of 1,050.
According to the brokerage "The companies will continue to witness margin pressures due to the restoration of overhead cost along with elevated commodity costs. Companies have taken price hikes with the continued commodity pressure (steel/aluminum/copper up 18/18/10% in past three months). However, due to demand disruptions, not all costs were covered, which will impact the margin. Our coverage universe is expected to deliver 2/19% YoY/three-year EBITDA CAGR in Q4FY22."
"Companies that are expected to outperform on three-year revenue CAGR will be Havells, Orient Electric, and Crompton, with 14/12/11% CAGRs. On three-year EBITDA CAGR, Voltas, Symphony, and Havells are expected to outperform, clocking 33/31/18% CAGRs," the brokerage has said.
HDFC Securities has highlighted that "A strong summer season is driving cooling products, which are a big profit pool for our coverage universe. Performance of these products will help these companies reinvest in other new launches. Besides, liquidating channel inventory (worry area during the last two years) will help trade partners keep other non-seasonal products, post the season."
"New housing/home improvement theme is sustaining and we expect non-seasonal products to sustain the growth momentum, despite macro slowdown in many consumption categories. The medium to long-term macro continues to be strong, with industrial Capex recovering and B-B/B-G demand recovering. RM inflation would impact operating margin, but it also offers share gain opportunity from small/regional players," further added the brokerage.
HDFC Securities has claimed that "We believe growth outperformance (among various consumer categories) will sustain rich valuations for most of our coverage companies. We have BUY ratings on Crompton Consumer and Orient Electric and ADD ratings on Havells, Voltas, TTK Prestige, V-Guard, and Symphony."