Nuvama Research has initiated coverage on two regional leaders in India’s ₹1.8 trillion consumer durables industry—Telangana-based EMIL and Bihar-based AVL—with a ‘Buy’ rating for both. The brokerage highlights the unique dynamics of the sector, where regional distribution chains with modest revenues, averaging ₹3 billion annually, showcase exceptional profitability due to operational discipline and efficiency.
For EMIL, Nuvama sees strong cash flow from its base in Telangana and Andhra Pradesh as a springboard for its expansion into the competitive NCR market. The stock is valued at 30x FY27E EPS, implying a DCF-based target price of ₹237, offering a 38% upside. The valuation assumes an 18% free cash flow growth over 10 years, with a 15% weighted average cost of capital (WACC).
For AVL, Nuvama projects robust growth across key financial metrics with an FY24–27E CAGR of 28% in revenue, 30% in EBITDA, and 41% in PAT, driven by aggressive store network expansion. AVL is valued at a 37.5x FY27E P/E, with a DCF-based target price of ₹672, reflecting a 36% upside. This valuation is premised on 21% free cash flow growth over 10 years and a 15% WACC.
The report underscores the regional nature of competition in the consumer durables sector, emphasizing the difficulty of dislodging incumbents once they achieve scale. Both EMIL and AVL are expected to benefit from their unique growth strategies and local market dominance, making them promising investment opportunities.
