The hotter the weather, the better it is for AC and refrigerator companies, especially since lockdowns over the past two summers had caused their sales to freeze. Companies such as Voltas, Whirlpool, Johnson Hitachi, IFB, and Symphony could see robust growth for summer products, paced by pent-up demand.
Mumbai: A blistering summer should slake the thirst for business at the makers of gadgets that keep you cool.
The hotter the weather, the better it is for AC and refrigerator companies, especially since lockdowns over the past two summers had caused their sales to freeze.
“A heat wave is certainly positive for summer consumer appliance manufacturers due to the increase in demand for ACs and refrigerators,” said Ajit Mishra, VP- research, Religare Broking.
“We expect healthy growth for these companies given that last year’s demand was impacted in April and May due to the second wave of the pandemic. We like stocks like Voltas and Whirlpool from a long-term perspective.”
The AC and refrigerator industries expanded at CAGRs of 12.9% and 13.6%, respectively, over FY10-20.
However, the sector witnessed a sharp decline in FY21, when the nation was emerging from a total lockdown toward the end of the summer. Performance next year was modest, too, as the second Covid wave crippled mobility across the country.
Shares of Symphony and Voltas have rallied over 10% in the last one week, while Johnson Controls and IFB Industries gained 6% and 5%, respectively, in the previous five trading sessions.
The summer season is a critical period for the growth of appliances such as AC and refrigerators as 50-60% of the annual demand is met during the four months from mid-February to mid-June, according to analysts.
“We believe that the upcoming summer season could see a blockbuster growth for durable consumer companies led by pent-up demand of past two summers, which were impacted due to lockdowns and likely change in consumer behaviour with the intensity of heat driving them to purchase cooling products,” said Chirag Muchhala, analyst, Centrum Broking. “However, managing cost inflation will be the key, but companies having larger scale and leaner cost structures will be able to manage the cost inflation better.”
While shares of Blue Star and IFB are expected to give a return of over 16% over the next one year, according to Bloomberg consensus estimates, Whirlpool India and Johnson Hitachi have potential upsides of 28% and 7%, respectively.
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