As the country sizzles under an unforgiving summer, shares of firms focussed on cooling products are getting hotter as demand for white goods is rising in tandem with the temperatures.
In today’s trade, the NSE Consumer Durable index was the second largest gainer, after Nifty Realty index, clocking a gain on 1.59%. Top gainers in trade today were Kajaria Ceramics (6.08%), V Guard Industries (3.48%), Dixon Technologies (2.70%), Voltas (2.51%) and Whirlpool (2.25%).
Apart from optimism over a demand uptake in the coming quarter led by recovery in rural demand, and a possible consumption spur in the budget, consumer stocks have been on an upswing since the budget. Analysts, particularly see consumer companies focussed on cooling products to do well in the coming quarter on the back of strong topline and bottomline growth.
Also Read | Indian room air-conditioner market to reach Rs 50,000 crore by FY29: Voltas
Consumer durables firms that had a summer-led portfolio, including ACs, fans, air coolers, along with commercial refrigeration products, saw healthy growth in the previous quarter.
In the March quarter, according to Centrum, air conditioners were the best performing category with the industry growing in excess of thirty percent.
Despite the monsoon season beginning in certain parts of the country, the summer categories are likely to see strong growth momentum in Q1FY25 as April and May have witnessed intense heat waves.
Consumer durables firms were anticipating the jump in demand, and began to up-stock their channels ahead of the summer season. However, despite planning in advance, many showrooms are reporting a ‘stock-out’ situation.
Among the top gainers on the bourses, Crompton Greaves, Voltas, Blue Star, and Havells India all gained between 23 to 55 percent in the past three months.
During the quarter ended March, Voltas and Blue Star’s cooling products segment grew in range of 35 percent and 44 percent on-year, respectively. In FY24, Bluestar reported over one million AC sales, while Voltas recorded its highest-ever AC sales of 2 million units.
Voltas, Havells and Blue Star also launched new product offerings for inverters, along with energy efficient and window ACs at various price points in Q4, therefore expanding their total addressable market.
In the ceiling fans segment, Havells and Crompton Greaves reported that the premiumisation trend is paying off, with the management betting on premium fans to drive value growth.
A key downside risk to monitor remains inflation. While the demand for fans has improved, its sustenance needs to be keenly monitored as historical trends have shown the impact of inflation on consumer spending to be negative, said Centrum Institutional Research.
Analysts at Anand Rathi expect Blue Star to clock a reveue growth 20 for FY25, and 33 per cent growth in profit, which indicates a P/E of 57.9x.
Voltas is likely to record Rs 1,782 crore in revenue for FY25, up 21 percent on-year, while Havells will report a growth on 15 percent at Rs 2,141 crore. This implies a P/E of 85.5x and 68.8x, respectively.
The brokerage has a 'buy' call on Havells and Crompton Greaves, but maintains a 'hold' rating on Blue Star and Voltas.
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