The modular kitchen industry in India is growing at a rapid space and there are some very evident trends driving the growth of the industry.
- Household income growth
- Indian consumers – A clear transition from Aspirers to seekers and strivers
- Brand consciousness
The Indian consumer market, which is primarily dominated by young generation, is becoming increasingly sophisticated and brand conscious. A typical upper middle class young consumer is beginning to look beyond the utility aspect of a product to seek intangibles like brand and lifestyle statement associated with the product. One such trend is developing in the home decor space with Kitchens being at the core of the same.
The kitchen, these days, forms an integral component of the modern Indian home and is no longer considered as an old utilitarian space. They are associated with defining and showcasing oneâ€™s lifestyle. There is an evident trend where homeowners are willing to dedicate a greater share of thought, space and budget to design and customize their kitchens with smart technology that will ease their lifestyle necessities.
What epitomizes and defines the new-age Indian kitchen is clearly, smart design and technology combined with better utilization and allocation of space. The modular kitchen, for one, has created a revolution for all the homemakers in India. Besides being snazzy to look at, itâ€™s handy and being small and compact, helps avoid space crunch.
According to Industry experts, the modular kitchens segment stands at around Rs 1500 crore. In India the readymade kitchens are currently sold at the rate of 10,000 units per month.
The increasing number of nuclear families, rising disposable incomes, affordability, and easy budget, is drive awareness levels and demand for modular kitchen, which is already growing at the rate of 45-50% per annum. Some experts also believe that Modular kitchen segment in India can grow 10 times in the next three to four years.
While this was about Modular Kitchen Industry, however it’s important to capitalize on such trends and there are just few companies, some direct plays while a few proxy plays on the burgeoing industry.
We have identified one such proxy play which has been growing at the rate of 34% annualized for the last 5 years. For FY 12 we expect the company to record a growth of 35-36% on their top line and considering their Q1 FY 12 results, they seem well on track for the same.
We believe the stock is well outside the purview of large and institutional investors and is thus trading extremely cheap besides commanding a good brand equity in it’s niche segment. The undervaluation can be judged by the fact that stock is currently available at a dividend yield of 3.2%.