ORIENTELEC - Orient Electric Limited Share Price

Orient Electric Limited's management provided a positive outlook for the second half of FY '26, anticipating stronger demand momentum driven by the festive season, improving retail sentiment, and normalization of channel inventory. They reported a consolidated revenue growth of 6.4% year-on-year to INR 703 crores for Q2 FY '26, with the lighting and switchgear segment leading this growth at 18.6%. Notably, premium SKUs constituted 65% of sales in consumer lighting.

Key forward-looking points include:

1. Premium Products: Continued focus on premiumization, driving product mix optimization, with BLDC fan sales up by 40% y-o-y, contributing to around 30% of domestic ceiling fan sales.

2. Market Expansion: The transition to direct-to-market (DTM) has been successful, particularly in Pune, with single-digit growth reported in DTM markets despite seasonal headwinds.

3. Operational Efficiency: The Project Sanchay initiative contributed cost savings of INR 24 crores in H1, supporting EBITDA growth of 6.4% y-o-y, yielding INR 38 crores with a margin of 5.4%.

4. Future Outlook Following GST Reforms: Anticipation that the recent GST reductions will unlock consumption in H2, particularly in premium segments.

5. Price Hikes: Management indicated selective price hikes to counter ongoing price erosion, with an expected increase of about 3% to 4% due to regulatory changes and commodity price shifts.

6. Order Book: The lighting segment, which is currently focused on balancing B2B and B2C revenue (75%-25%), is poised for continued growth with an emphasis on innovative projects in professional lighting.

Overall, the management expresses optimism about outpacing industry growth in light of these indicators and strategies.

Here are the major questions and their respective answers from the Q&A section of the earnings transcript for Orient Electric Limited:

Question from Dhruv Jain: "I had two questions. First question is on the lighting segment in which...how many states are you working right now with your wires? And what's the plan ahead in FY '26 and '27?"

Answer from Ravindra Singh Negi: Thank you for asking about wires, as it's an emerging segment for us. We have rolled out in stronger markets in the North, East, and some in the South. Our strategy focuses on gradual rollout and leveraging our strong presence in fans to gain traction. While I can't provide exact numbers, we've seen good market acceptance and response, indicating promising growth potential.

Question from Dhruv Jain: "In the lighting segment, we've seen your margins have declined Q-o-Q and Y-o-Y...just if you could throw some light on the margins for the Lighting segment?"

Answer from Ravindra Singh Negi: We've faced pricing pressure this quarter due to market conditions and early Diwali. While we've achieved high double-digit volume growth, our structure remains intact. I believe the rate of price erosion is stabilizing, and long-term, we foresee restoring margins in the lighting segment.

Question from Dhruv Jain: "What's the inventory level that you have with respect to fans in the channel? With upcoming regulatory change, what's the kind of price hikes?"

Answer from Ravindra Singh Negi: The rainy season has dampened demand but we still registered low single-digit growth in fans. Pricing for star-rating will likely see an average hike of 3-4%. We've optimized inventory levels in anticipation of this transition, ensuring we maintain our market competitiveness while managing costs appropriately.

Question from Bhargav: "Now that the Hyderabad facility has been commissioned...do you have a strategy to increase market share in South, particularly Tamil Nadu?"

Answer from Ravindra Singh Negi: Tamil Nadu is critical for us, and with the new Hyderabad facility, we aim for improved logistics and service speed. While current market share is modest, we are optimistic about recovery next season. We've seen shares rise in states like Karnataka and Telangana.

Question from Bhargav: "Is there any change in your guidance regarding margins with the current momentum?"

Answer from Ravindra Singh Negi: I still hold to our initial guidance of a 6-8 quarter timeline for double-digit margins. Despite challenges this year, historically, H2 typically represents our stronger performance, and I'm confident in our pathway toward improved profitability.

Question from Bhargav: "There has been some increase in working capital...will it normalize in the next quarters?"

Answer from Ravindra Singh Negi: Yes, the current increase is due to strategic inventory buildup ahead of the festive season. We expect normalization in the coming quarters as we manage our inventory levels more effectively, capitalizing on demand opportunities without missing out.

Question from Arshia Khosla: "Have we taken any price hikes during the quarter? If yes, what would be the quantum?"

Answer from Ravindra Singh Negi: Yes, we implemented an average price increase of about 1.5% on fans towards the end of September. This measure was necessary to mitigate the impact of rising commodity costs while managing pricing sensitivity in the market.

Question from Rachna Kukreja: "My second question would be about our DTM strategy...how have we seen market share gains across our key DTM states?"

Answer from Ravindra Singh Negi: We've successfully transitioned 12 states to the DTM model, now seeing about a 100 basis point gain in our market share. The revenue mix is shifting closer to 2/3 from MD and 1/3 from DTM as we continue to adapt our strategy in various regions.

These answers provide insights into the company's strategies, market performance, inventory management, and future guidance, reflecting adaptability in a challenging market environment.