HSIE sees muted growth as soft cooling demand and cost pressures offset EMS resilience
Demand across most consumer durables categories remained muted in the December quarter of FY26, though signs of recovery have begun to emerge after a subdued first half of the year, according to a Q3FY26 results preview by HDFC Securities Institutional Equities (HSIE)
HSIE noted that demand for room air conditioners (RACs), coolers and fans stayed weak during the quarter, weighed down by unfavourable weather conditions and elevated channel inventories. However, growth momentum has improved compared to the first half of the fiscal. Ahead of the tightening of Bureau of Energy Efficiency (BEE) norms for RACs and fans from January, distributors stepped up inventory stocking by late December.
The brokerage expects the consumer durables universe under its coverage to report year-on-year revenue growth of 6 per cent in Q3FY26, while ebitda growth is likely to remain subdued at 1 per cent and profit after tax is expected to decline 1 per cent.
Segment-wise, wires and cables are projected to deliver strong performance, driven by price hikes, although rising input costs are likely to exert pressure on margins. The lighting segment is expected to see low single-digit revenue growth, supported by higher volumes but constrained by price erosion. Kitchen appliances are forecast to post mid-single-digit growth, while momentum in the water purifier segment has slowed.
Input cost pressures remained a key concern during the quarter. Copper prices surged about 28 per cent year-on-year and 15 per cent sequentially, while aluminium prices rose 16 per cent year-on-year and 10 per cent quarter-on-quarter. In contrast, polypropylene prices declined 7 per cent year-on-year, offering some relief to manufacturers.
The electronics manufacturing services (EMS) segment is expected to sustain its growth trajectory, albeit at a more moderate pace. HSIE expects the EMS universe to record year-on-year growth of 11 per cent in revenue, 22 per cent in ebitda and 17 per cent in profit during Q3FY26. Growth is likely to be tempered by a slowdown in the mobile phone segment for Dixon Technologies and subdued RAC demand impacting Amber Enterprises.
Despite these headwinds, Kaynes Technology and Syrma SGS are expected to continue reporting healthy topline growth during the quarter.
On valuations, HSIE said it has lowered valuation multiples for consumer durables companies amid heightened competition. For EMS companies, the brokerage has shifted to a discounted cash flow (DCF) methodology from price-to-earnings valuation, citing earnings volatility arising from capex cycles, incentive structures and moderating growth trends.
