Home / Markets / Mark To Market /  Home decor shines thanks to wood panel and tile makers

Home decor companies saw robust performance in the September quarter. Pent-up demand, aided by revival in the real estate sector, translated into double-digit volume growth across product categories. However, wood panel makers and tile companies showcased better performance than pipe manufacturers, overtaking the latter on revenue growth and operating metrics.

“In Q2FY22, wood panel companies outperformed with revenue/Ebitda/profit after tax growth of 54%/60%/77% year-on-year (y-o-y) led by strong volume growth across categories—plywood, laminates, MDF and particle board. Tiles, too, witnessed 35%/29%/38% y-o-y growth and healthy margins," analysts at Edelweiss Securities Ltd said in a report. Ebitda is short for earnings before interest, taxes, depreciation and amortization.

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In the past few quarters, pipe companies have been displaying impressive earnings growth. But in the September quarter, their performance was marred by elevated raw material prices and the delay in passing on the same. This weighed on their operating margins. The plastic pipes segment reported revenue/Ebitda/ profit after tax growth of 24%/ 20%/ 27% y-o-y, but with poor operating margins, showed the Edelweiss analysis.

Another theme that worked in favour of home decor companies is consolidation of the industry and, thereby, market share gains from the unorganized sector. Dealers’ channel checks by various brokerages show that smaller and regional companies operating in this sector have been struggling to survive post the covid pandemic owing to stretched working capital needs. Further, the steep rise in raw material costs due to global supply chain constraints has worsened cost pressure. And the sharp rally in share prices of these stocks captures this benefit, analysts said.

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