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Informist, Friday, Mar. 7, 2025

 

By Simran Rede

 

MUMBAI – The festival of lights did not live up to its reputation for the durable goods sector. While analysts had predicted a massive 98.5% on-year growth in bottom line for the three durable goods companies of the Nifty 200 in the December quarter, they posted a relatively modest 66% rise. The aggregate top line of these companies rose nearly 56% on year for the quarter, higher than the expected 50% growth. None of the three companies met the sector estimate on profit, while only one met the sector estimate on sales.

 

On the other hand, the five retail sector companies that are a part of the Nifty 200 reported a 22% growth in net profit for the December quarter, much lower than the 32% increase the Street had estimated. These companies reported a nearly 18% growth in sales, just below the 18.5% analysts had expected.

 

CONSUMER DURABLES

Not only did the three durable goods companies not meet the sector estimate for net profit for the December quarter, none of them met the company-level estimate for net profit either. A large increase in costs eroded the growth in sales and this resulted in these companies missing the estimates for profit growth. Total sales of these companies rose almost 56%, higher than the 49% estimate, but total expenses rose 55%, driven mainly by a whopping 73% increase in the cost of raw materials.

 

In the same quarter a year ago, a 39% rise in revenue had resulted in these companies reporting a 57% jump in profits despite a 57% rise in raw material costs. While sales rose 56%, a 73% surge in raw material costs resulted in the companies reporting only a 66% increase in profits, modest compared with the 98% increase analysts had expected. The growth in net profit would have been much higher had the raw material prices not risen so sharply.

 

Havells India Ltd. was the worst performer on net profit growth – it was the only company to post a decline in its bottom line growth, which was down 1.8%. Dixon Technologies (India) Ltd.'s depreciation expenses of INR 746 million, lower-than-expected other income of INR 65 million, and a 46% on-year rise in other expenses affected its margins. Net profit of Havells was pressurised by a 22% year-on-year rise in purchases of stock-in-trade and employee costs each, and a 21% increase in input costs. Voltas Ltd.'s bottom line was affected by a 27% rise in input costs and a 12% rise in total expenses.

 

Only one company exceeded the consensus view on revenue growth for the sector in Oct-Dec, while the other two missed the forecast by a wide margin. Two companies exceeded the company-level estimates, while one missed it by over 3 percentage points.

 

A large part of the revenue spike recorded by the sector was due to an extraordinary surge in the sales of Dixon Technologies. Excluding Dixon Technologies, the remaining two companies would have posted just 13.7% rise in sales and would have missed the 14% growth estimate.

 

The revenue of Dixon Technologies shot up 117% on year, exceeding the 50% growth projected for the sector by a wide margin. This surge in the top line was on the back of a substantial contribution of INR 93 billion from the mobile and electronic manufacturing services segment, reflecting a 190% growth. This segment now accounts for 89% of the company's total revenue.

 

RETAIL COMPANIES

In contrast, the retail companies that are a part of the Nifty 200 posted only modest growth in net profit for the December quarter, as the festival season failed to set alight the sales charts. The net profit of these companies rose over 22% on year in the December quarter, but was below the expected 32% growth.

 

The net profit of these companies was below analysts' expectations due to muted consumption in urban areas. Of the five companies in the sector, three beat the analysts' estimates for the sector. Aditya Birla Fashion and Retail Ltd., which operates various clothing brands, reported a net loss for the eighth consecutive quarter in Oct-Dec. The company's employee costs rose nearly 15% on year. However, the loss narrowed both on year and sequentially.

 

Online beauty retailer FSN E-Commerce Ventures Ltd., also known as Nykaa, saw an impressive 61% rise in net profit on year. Although three companies beat the sector estimate, only FSN E-Commerce beat it by a wide margin. The company's net profit rose sharply as sales rose 27% and its purchases of stock-in-trade, its highest expense item by a wide margin, rose only 4%.

 

Avenue Supermarts Ltd. had the highest contribution to the sector net profit with an absolute net profit of INR 7.85 billion, but posted the lowest rise among its peers. While the company's bottom line grew in the mid-single digits, it missed the Street view for the sector by a wide margin of nearly 26 percentage points. An 18% rise in purchases of stock-in-trade, which accounts for 90% of its total spend, weighed the most on the fall in net profit.

 

The aggregate net profit margin for the sector expanded to 5.12% from 4.93% in the year-ago quarter. The net profit margin was 4.64% in the September quarter. Page Industries Ltd. has the highest net profit margin of over 15.6% among its peers.

 

In terms of the revenue growth for the sector, only two companies exceeded the consensus view of 18.5% growth for the sector in Oct-Dec, while one missed the estimate by just one percentage point. Avenue Supermarts and Aditya Birla Fashion could not meet analysts' estimates for the sector but met the estimate at the company level.

 

Tata group company, Trent Ltd., recorded the highest revenue growth of 37%. An increase in store count and an uptick in sales of fashion and beauty products, especially during the festival season, drove this growth. The company's fashion portfolio registered high single-digit like-for-like growth. FSN E-Commerce reported exceptional performance with a 27% increase in sales. This rise was on the back of a 27% increase in sales from the company's beauty segment, the highest contributor to its consolidated revenues, and a growth in Nykaa's cumulative beauty customer base to 32 million customers.

 

Aditya Birla Fashion and Page Industries were the laggards in the sector as they posted single-digit sales growth due to weak urban demand. Aditya Birla Fashion reported a low-single digit 3.3% on-year growth in top line for the quarter, the lowest in 15 quarters.

 

Page Industries, known for its Jockey brand of innerwear and apparel, clocked a 7% year-on-year rise in sales. Subdued demand continued to affect sales, the company had said. The festival season boosted demand at the start of the December quarter but fizzled out, the company had said. Modern retail channels, including exclusive branded stores and e-commerce, continued to grow impressively, with e-commerce channels continuing to outperform other sales channels.

 

The following table shows the performance of the three companies in the consumer durables sector vis-a-vis the consensus estimate for each company as well as against the consensus estimate for the consumer durables sector and the Nifty 200 index:

 

Nifty 200 Q3 PAT growth 8.8%

Nifty 200 Q3 PAT growth consensus estimate 10%

Nifty 200 Q3 revenue growth 5.5%

Nifty 200 Q3 revenue growth consensus estimate 4%

 

Company	PAT beat analysts' estimate	Adjusted PAT growth %	Adjusted PAT	PAT beat sector estimate	PAT beat Nifty 200 estimate		Revenue beat analysts' estimate	Revenue growth %	Revenue	Revenue beat sector estimate	Revenue beat Nifty 200 estimate
			growth						growth
			estimate %						estimate %
Durables sector		66	98.47					55.7	49.47
Dixon Technologies (India) Limited	NO	77.51	101.89	NO	YES		YES	116.96	100.85	YES	YES
Havells India Limited	NO	-1.76	20.58	NO	NO		NO	10.95	14.05	NO	YES
Voltas Limited	--	--	--	--	--		YES	18.26	14.52	NO	YES

 

 

The following table shows the profit margins of the three consumer durables companies that are a part of the Nifty 200.

 

	PAT Margin for Dec-24	PAT Margin for Dec-23	PAT Margin for Sept-24
Nifty 200	11.87%	11.51%	11.37%
Durables sector	3.18%	2.99%	4.26%

 

Company	PAT Margin for Dec-24	PAT Margin for Dec-23	PAT Margin for Sept-24
Dixon Technologies (India) Limited	1.64%	2.00%	3.38%
Havells India Limited	5.79%	6.54%	6.01%
Voltas Limited	4.26%	-1.16%	5.12%

 

 

The following table shows the performance of the five companies in the retail sector vis-a-vis the consensus estimate for each company as well as against the consensus estimate for the retail sector and the Nifty 200 index.

 

Nifty 200 Q3 PAT growth 8.8%

Nifty 200 Q3 PAT growth consensus estimate 10%

Nifty 200 Q3 revenue growth 5.5%

Nifty 200 Q3 revenue growth consenus estimate 4%

 

Company	PAT beat analysts' estimate	Adjusted PAT growth %	Adjusted PAT	PAT beat sector estimate	PAT beat Nifty 200 estimate		Revenue beat analysts' estimate	Revenue growth %	Revenue	Revenue beat sector estimate	Revenue beat Nifty 200 estimate
			growth						growth
			estimate %						estimate %
Retail sector		22	32.06					17.9	18.47
Aditya Birla Fashion and Retail Limited	YES	--	--	--	--		YES	3.31	2.51	NO	NO
Avenue Supermarts Limited	NO	6.49	16.26	NO	NO		YES	17.5	17.5	NO	YES
FSN E-Commerce Ventures Limited	NO	61.43	134.86	YES	YES		NO	26.74	28.33	YES	YES
Page Industries Limited	YES	34.33	21.82	YES	YES		NO	7.14	10.53	YES	YES
Trent Limited	NO	36.59	51.86	YES	YES		NO	36.9	40.01	YES	YES

 

 

The following table shows the profit margins of the five retail companies that are a part of the Nifty 200.

 

	PAT Margin for Dec-24	PAT Margin for Dec-23	PAT Margin for Sept-24
Nifty 200	11.87%	11.51%	11.37%
Retail sector	5.12%	4.93%	4.64%

 

Company	PAT Margin for Dec-24	PAT Margin for Dec-23	PAT Margin for Sept-24
Aditya Birla Fashion and Retail Limited	-1.19%	-1.87%	-5.10%
Avenue Supermarts Limited	5.04%	5.56%	5.06%
FSN E-Commerce Ventures Limited	1.15%	0.90%	0.54%
Page Industries Limited	15.59%	12.43%	15.67%
Trent Limited	10.35%	10.37%	10.49%

 

End

 

Edited by Ashish Shirke

 

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