iifl-logo-icon 1
IIFL

Invest wise with Expert advice

By continuing, I accept the T&C and agree to receive communication on Whatsapp

  • Open Demat with exclusive Advice & Services
  • Get a dedicated Relationship Manager to help you grow your wealth
  • Exclusive advisory on 20+ trading & wealth-based investment options
  • One tap Investments, Automated trading & much more
  • Minimum 1 lakh margin required
sidebar image

Electronics Retail: Expanding Footprint to drive growth

16 Apr 2024 , 11:14 AM

Organised consumer electronics retail in India is set to grow in the mid-high teens on the back of increased penetration for products and market share gain from unorganised stores. Moreover, brick-and-mortar players would thrive despite competition from e-commerce, especially in large appliances, due to financing, service, and a need to check out products side by side. Aditya Vision (AVL) and Electronics Mart (EMIL) are the listed players in this space. AVL has higher growth (FY24- 27 EPS Cagr 24% vs 20.2% for EMIL) and return ratios (~20% ROIC vs ~13% for EMIL) and therefore analysts of IIFL Securities prefer AVL over EMIL. They initiate with BUY on both companies with TP of Rs4200 on AVL (24% upside) and Rs250 on EMIL (26% upside).

An underpenetrated segment:

Consumer Electronics industry is likely to grow in double digits for several years driven by increase in penetration for consumer electronics. For instance, RAC (room air conditioners) penetration in India is quite low at 17% and that of refrigerators is 40%. Increasing incomes, improving electricity supply, rising aspirations and improved availability of credit would result in a double digit growth in these segments. Moreover, premiumisation (shift from window ACs to split ACs, from semi-automatic WMs to fully automatic WMs) is resulting in growth even beyond simply penetration.

Organised segment to grow faster:

On the back of improved shopping experience, wider product assortment, easy access to finance, better after sales support and so on, organised share of retailing which stands at 54% in FY22 is expected to go up to 70-75% by FY27. Organised retail have direct connect with OEMs which result in better gross margins, which in turn enables them to compete better vs small players. As a result, organised retail is likely to grow at ~16- 17% Cagr over FY22-27.

E-commerce not a big threat:

Consumers have adopted Ecommerce differently across different categories; E-commerce share for Mobiles stands at 58% but for large household appliances, it is only 17%. In the latter, consumers prefer to go to a physical store to check out the look and feel of the product, discuss warranty and exchange, get priority on installation and so on. In recent times, there is a bit of reverse migration from e-commerce to brick-and-mortar stores in mobiles as well. Analysts of IIFL Securities believe that brick-and-mortar organised retail would still grow at ~14% even allowing for some share loss to online platforms.

Aditya Vision (AV) and EMIL listed plays in this space:

Both companies are over-indexed in relatively higher gross margin large appliances (vs the industry), but AV more so at 69% than EMIL at 48%. ROIC is higher for AV at 20% (FY23) vs 13% for EMIL largely on account of higher gross margins. Currently, AV faces lower competition as large retailers such as Reliance Digital and Croma are probably focused on plucking low-hanging fruit in other, larger markets. While they could turn their attention towards AV markets, analysts of IIFL Securities believe that this risk is a few years down the line. EMIL on the other hand, needs to demonstrate ramp-up of its NCR store sales from the current ~Rs.200-250m in order to get confidence in its north India expansion.

Initiate with BUY on both stocks, prefer AV:

Analysts of IIFL Securities initiate with BUY on AV with TP of Rs4200 and on EMIL with TP of 250. Given higher growth (FY24-27 sales/EPS growth of 23%/24% for AV vs 16%/20% EMIL) and higher return ratio, analysts of IIFL Securities believe that AV could have a higher target multiple of 40 vs 37 for EMIL. While competitive intensity could increase in AV’s territories, analysts of IIFL Securities believe that this is a few years away.

Related Tags

  • Electronics Retail
sidebar mobile

BLOGS AND PERSONAL FINANCE

Read More

Most Read News

Indian markets end the day in red
28 May 2024|05:17 PM
Gaurav Banerjee to be CEO of Sony India
28 May 2024|05:18 PM
Indian markets in mixed zone
28 May 2024|02:23 PM
Read More
Knowledge Centerplus
Logo

Logo IIFL Customer Care Number
(Gold/NCD/NBFC/Insurance/NPS)
1860-267-3000 / 7039-050-000

Logo IIFL Securities Support WhatsApp Number
+91 9892691696

Download The App Now

appapp
Knowledge Centerplus

Follow us on

facebooktwitterrssyoutubeinstagramlinkedin

2024, IIFL Securities Ltd. All Rights Reserved

ATTENTION INVESTORS
  • Prevent Unauthorized Transactions in your demat / trading account Update your Mobile Number/ email Id with your stock broker / Depository Participant. Receive information of your transactions directly from Exchanges on your mobile / email at the end of day and alerts on your registered mobile for all debits and other important transactions in your demat account directly from NSDL/ CDSL on the same day." - Issued in the interest of investors.
  • KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary.
  • No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries for refund as the money remains in investor's account."

www.indiainfoline.com is part of the IIFL Group, a leading financial services player and a diversified NBFC. The site provides comprehensive and real time information on Indian corporates, sectors, financial markets and economy. On the site we feature industry and political leaders, entrepreneurs, and trend setters. The research, personal finance and market tutorial sections are widely followed by students, academia, corporates and investors among others.

RISK DISCLOSURE ON DERIVATIVES
  • 9 out of 10 individual traders in equity Futures and Options Segment, incurred net losses.
  • On an average, loss makers registered net trading loss close to Rs. 50,000.
  • Over and above the net trading losses incurred, loss makers expended an additional 28% of net trading losses as transaction costs.
  • Those making net trading profits, incurred between 15% to 50% of such profits as transaction cost.
Copyright © IIFL Securities Ltd. All rights Reserved.

Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213,IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248

plus
We are ISO 27001:2013 Certified.

This Certificate Demonstrates That IIFL As An Organization Has Defined And Put In Place Best-Practice Information Security Processes.