Consumer Discretionary - Q1FY21 Result Preview - ICICI Securities

The consumer discretionary universe has not been insulated in the impact of lockdown in April 2020. After a loss of sales for almost a month, companies under our coverage started operations from the first week of May 2020. However, post relaxation from lockdown, companies under our coverage saw improved utilisation level with a strong demand recovery in June 2020 (reached almost pre-Covid levels). Non containment zones witnessed pent up demand in fans, kitchen appliances and building materials (paints) as soon as the government eased restrictions. However, business activities in containment zones (largely tier I cities) in Q1FY21 remained impacted by lockdown and migration of labourers. We believe while B2C business witnessed a demand recovery, the project and industrial categories were largely impacted by low government expenditure and labour issues. Under the FMEG category, Havells India and Voltas Beko witnessed strong pent up demand in fans, kitchen appliances, dishwashers and washing machines in June 2020. On the piping front, demand was impacted in the first two month of Q1FY21. However, dealers witnessed some demand recovery in June 2020 led by maintenance related works.

Low sales, margin dent bottomline

The companies under our coverage may see a sharp fall in PAT by about 80% YoY mainly due to lower sales and sharp fall in EBITDA margin. However, we believe the encouraging trend of demand recovery in May and June would see a sharp reversal on EBITDA margin, going forward.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_ConsumerDiscretionary_Q1FY21.pdf

Source : Equity Bulls

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