Cooling demand warms up trouble for AC stocks, brokerages remain cautious

Muted summer, excess inventory drag RAC sector

Global brokerage firm Jefferies highlighted that unseasonal rains during May and June this year are estimated to result in a 15 to 20 percent year-on-year decline in room air conditioner (RAC) industry sales.

According to analysts, sales of unitary cooling products (UCP) in the first quarter of FY26 are expected to drop by a low double-digit percentage for companies like Voltas and Blue Star.

Jefferies also reduced its earnings per share (EPS) estimates for FY26 to FY28 by 6 percent, citing weaker-than-expected demand. Analysts observed that channel inventory levels remain higher than usual — by about 3 to 4 weeks — and added that the next potential volume trigger for RAC sales could be inventory clearance in the third quarter of FY26, before the new Bureau of Energy Efficiency (BEE) norms kick in on January 1, 2026.

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As for company-specific commentary, most brokerages maintained a “neutral” view on Voltas. Both Nomura and Nuvama Institutional Equities echoed this sentiment, assigning target prices of Rs 1,290 and Rs 1,190 per share, respectively.

Nomura pointed out that the near-term outlook remains challenging due to a muted summer and subdued cooling demand. Secondary sales of Voltas saw an estimated 20 to 25 percent year-on-year drop in April and May because of unseasonal rainfall and an early onset of monsoon. Demand remains weak, inventory levels are in the range of 6 to 8 weeks, and while there have been no major price cuts, promotional offers are common in the market.

Nuvama analysts, too, expect an industry-wide decline of around 20 to 25 percent in RAC volumes, including both primary and secondary sales.

So far in 2025, Voltas shares have fallen by 29 percent. Peer companies like Blue Star, Amber Enterprises, and Johnson Controls have also seen their stock prices decline, with losses of up to 26 percent.

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