Kotak expects sales growth in consumer durables for June quarter
Consumer durables companies are likely to report improved sales for the June quarter, driven by strong demand across key product categories. However, rising raw material costs are expected to put pressure on profit margins, according to a Kotak Institutional Equities earnings preview report for the first quarter of fiscal year 2027.
The brokerage highlighted that the wires and cables segment is expected to lead the sector's performance, supported by higher metal prices and improving volumes.
"Volume growth is likely to improve sequentially. Pricing growth is expected to remain healthy as copper and aluminium prices were up around 51 per cent and 57 per cent year-on-year, respectively, on an M-1 basis in the first quarter," the Kotak report stated.
Room air conditioners to be top performer among appliances
Kotak expects room air conditioners (RACs) to be the best-performing appliance category in the June quarter, benefiting from a weak base and price hikes. The report also forecasts healthy growth for washing machines and televisions, while refrigerator sales may remain weak.
In the electrical consumer durables segment, the brokerage expects growth to be supported by price hikes in fans and strong demand for small domestic appliances, kitchen appliances, and water purifiers.
"We expect pricing-led growth of 10-12 per cent in fans, even as volumes could remain weak. TPW fans and air coolers are likely to disappoint despite a weak base, while small domestic and kitchen appliances, along with water purifiers, are expected to perform well," the report said.
Raw material cost pressures to impact profitability
Despite stronger sales, Kotak noted that higher raw material costs are likely to affect profitability across the sector. Most companies have only partially passed on raw material inflation through price hikes and lower channel incentives, which is expected to weigh on gross margins.
The report added that lower advertising and promotion spending could help mitigate some of the margin pressure.
Overall, the brokerage expects price hikes, favorable base effects, and healthy demand across select product categories to support consumer durables sales in the June quarter, while rising raw material costs remain the biggest challenge for margins.
