“The inventory is at a higher level…which is quite a high level throughout the season, like from the summer, bad summer and then the July-September quarter of 2025 (Q2FY26) and now we are in the third quarter and still with a higher inventory. Definitely, that’s one of the concerns we are carrying right now for the next season,” he said. Inventory for seasonal products such as air conditioners stands at roughly 65 days, or around three million units, and the relatively normal winter has not aided stock liquidation.
The inventory pressure is also intensifying margin concerns. Sahay highlighted two major cost headwinds: raw material price inflation and higher compliance costs resulting from changes in Bureau of Energy Efficiency (BEE) norms.He is cautious about manufacturers’ ability to pass on these costs, particularly in a demand environment weighed down by excess supply. “I’m worrying on the margin front because if they will not able to pass on the raw material (RM) price inflation or the BEE norm then that will be a big problem for the margin front especially for the room air conditioner (RAC) players,” he said.
As a result, Sahay expects third-quarter earnings for the sector to remain subdued, describing Q3 results as very soft and muted, with little incremental support even if goods and services tax (GST) cuts materialise.
Sahay also flagged weather trends as an added variable for demand recovery. He stated that a harsh winter typically precedes a longer or stronger summer, which would support sales of cooling appliances. The current mild winter, however, raises uncertainty around demand momentum in the next season.
Also Read: LG Electronics upbeat on business recovery, aims to return to double-digit growthDespite these sector-wide challenges, Sahay identified LG Electronics India as a preferred stock within consumer durables. While acknowledging a recent sell-side view that suggested LG was losing market share, he offered a contrasting assessment based on the company’s business mix and positioning. “What we like about the LG is a diversification throughout the consumer durable segment,” he said.
He highlighted LG’s leadership in large white goods, its strong presence in the premium segment where margins are higher, and its ability to defend market share in this category. Additional growth drivers include the company’s expanding business-to-business (B2B) and annual maintenance contract (AMC) businesses.
Also Read: GST cuts to lift auto, FMCG, consumer durables earnings by 4-10% next fiscal: Mahesh Patil
From a valuation standpoint, Sahay said LG appears relatively attractive. With earnings expected to grow at a 9–10% compound annual growth rate (CAGR), he said that the stock trades at a discount to peers such as Havells India and compares favourably with Voltas, which he said was trading at 36 times its 2027-28 (FY28) earnings. “On that front also, it’s looking better off,” he said.
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