Consumer durables stocks like Whirlpool, Voltas, Blue Star & Hitachi growth may not match early spark

MUMBAI: Investors riding high on strong returns generated by consumer durable stocks like IFB Industries, Whirlpool, Voltas, Blue Star and Hitachi should turn a little cautious as the last two quarters’ strong growth trend may not continue. These companies are unlikely to reap the full impact of the festive season in the December 2014 quarter.

The festive sales were split between September and December due to early Navratri and Diwali in 2014.

Along summer and an early festive season led to a strong first half for these companies, giving many investors an impression that the demand has bounced back for discretionary products post-election. A base effect, thanks to lower sales in the year-ago period, also boosted the numbers and fuelled sentiment. There was a growth of 27-57% in sales for the September quarter and 25-39% in the first half of FY15. The earnings growth figures were even higher. The result was a surge in stock prices (See table). But, random checks (while talking to dealers and mall outlets) suggest that the sales in the December quarter have been less than impressive. One spots a similar trend in other consumer discretionary sectors like passenger vehicles and two-wheelers.

For instance, Hero Moto reported minus 2% growth YoY for the December quarter, Bajaj Auto recorded minus 1% growth YoY while M&M closed the quarter minus 12% YoY growth. Maruti was an exception, generating a 12% growth YoY. While analysts are justifying current high valuations — claiming that these companies will benefit from the correction in steel, copper and aluminium prices — a weak sales growth may keep sentiments sombre.