Hotting Up: Stocks of AC makers surge as temperature rises

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The early onset of summer and a heat wave in large parts of the country have boosted shares of air conditioner and desert cooler manufacturers, as well those of power generating companies.

In the last three weeks, shares of AC manufacturer Blue Star gained about 16 percent. Stocks of peers Symphony and Voltas have surged 14 percent and 21 percent, respectively, since the start of March.

Bajaj Electricals, which manufactures air-coolers among other appliances, rose 5 percent over the period, while Whirlpool advanced over 8 percent in the last two weeks.

Many meteorological districts such as north Madhya Maharashtra, Vidarbha and Madhya Pradesh have recorded a maximum temperature between 43 and 44 degrees. Severe heat wave conditions have set in over most parts of Rajasthan and parts of Gujarat.  The heat wave will continue over south Rajasthan, Gujarat, Madhya Pradesh and Maharashtra, according to private forecaster Skymet Weather Services.

“March witnessed a sharp rebound in primary sales, especially for the summer-driven categories of air conditioners, refrigerators and fans due to the rising intensity of heat,” said Chirag Muchalla, research analyst, capital goods and consumer durables, Centrum Broking.

“The consumer durables sector will witness growth which would be aided by summer season categories such as AC and refrigerators due to pent-up demand (the past two years’ summers were impacted by lockdowns) and intense summer heat. The commercial refrigeration categories are also likely to post healthy growth due to favourable tailwinds from food, retail, healthcare, pharma and commercial offices sector,” Muchalla added.

Analysts expect this will be the best year for the consumer durables industry given that there is no threat of new COVID waves. Investors will now await March quarter earnings and management commentary when results are announced.

“Certainly, the business will be far smoother than what we have witnessed in the last two summers and we should see good volume growth. Having said that, we might see some disruptions due to the lockdowns in China. Procurement of raw materials might get affected,” said Naval Seth, deputy head of research, Emkay Global Financial Services.