Customs duty cut, I-T slab rejig to boost consumer durable stocks: Analysts

With revised customs duty across consumer electronics' manufacturers, analysts believe this measure would reduce costs for manufacturing mobile phones, TV panels, and kitchen chimneys

Consumer durable companies are back in focus after several measures like revised tax slabs, reduced customs duty, and higher allocation in the PM-Awas Yojana were announced in the Union Budget for fiscal 2023-24. From wires-to-cable companies to kitchen chimney manufacturers, analysts believe a range of related stocks to benefit from this move in the long-term as a result.

“A push for affordable housing is positive for wire and cable companies as they are ancillary to the housing development. Moreover, the customs duty changes concerning the camera lens and its inputs and open cells of television panels will provide an impetus to value added products in the domestic manufacturing of electronics, under Atmanirbhar Bharat push by the government," said Neeraj Chadawar, head of quantitative equity research at Axis Securities.

The Union Budget 2023-24, on February 1, increased allocation in the PM-Awas Yojana by 66 per cent to Rs 79,000 crore. The government also proposed to cut customs duty on parts of open cells of television panels to 2.5 per cent from 5 per cent. That apart, customs duty on camera lens or input parts for camera modules of cellular mobile phones was reduced to zero/nil, and was reduced to 15 per cent on heating coils.

The basic customs duty on electric kitchen chimneys, meanwhile, was raised to 15 per cent from 7.5 per cent.

With revised customs duty across consumer electronics’ manufacturers, analysts at Prabhudas Lilladher believe this measure would reduce costs for manufacturing mobile phones, TV panels, and kitchen chimneys. Therefore, companies like Havells, Dixon Technologies, Crompton Consumer, KEI Industries, Polycab, and Voltas, they said, are likely to be the key beneficiaries over time.

While analysts at ICICI Securities picked Whirlpool and TTK Prestige to gain from revised customs duty on electric kitchen chimney and duty coil, analysts at Sharekhan chose Inflame Appliances.

Besides, the ongoing production linked incentive schemes, higher allocation in electrification projects, and road infrastructure works are also likely to brighten the fortunes of consumer durable companies, added analysts.

“Increased allocation in electrification projects will boost demand for fan, lighting products, small appliances, and therefore, will be positive for wire and cable players like Polycab, KEI, and Havells. The increase in metro projects outlay, on the other hand, will benefit HVAC (heating, ventilation, and air conditioning) project companies and AC component manufacturers like Amber Enterprises, and Blue Star," wrote analysts at Dolat Capital in a post-Budget analysis.

That said, since the income-tax rebate limit was increased to Rs 7-lakh under the new tax regime, analysts believe this move to translate into higher disposable income in the hands of tax-payers, enabling consumers to purchase high-ticket items.

“A relief to the middle class on the income tax front by restructuring tax slabs in the new regime is like a cherry on the cake. For high-income individuals, reduction in the highest surcharge rate in personal income tax to 25 per cent from 37 per cent is a positive move. With the consequent increase in disposable income, these initiatives are expected to spur consumption," Chadawar added.

So far this fiscal year (FY23), the S&P BSE Consumer Durables index declined 8.6 per cent, as against a 3 per cent surge in the S&P BSE Sensex. Individually, shares of Dixon Tech, Voltas, Crompton Greaves, Whirlpool, and TTK Prestige have slumped up to 37 per cent, during the same period.