Air conditioner brands Voltas, Blue Star, Havells rally ahead of festive season

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Air conditioner brands Voltas, Blue Star, Havells rally ahead of festive season
BCCL
  • Air conditioner manufacturers feel that the drastic change to remote working has brought good demand from the residential space.
  • Shares of AC makers Voltas, Havells India and Blue Star have gained 10-24% since September on hopes of strong demand this festive season.
  • Improving consumption power and housing activities will attract good revenue in the coming quarters for the sector.
Air conditioner (AC) manufacturers are expected to see strong demand as India nears the festive season. In fact, shares of AC manufacturing companies have already started reflecting a positive outlook for the sector.

Apart from this, the government decision to make India a global manufacturing hub for ACs under its ‘Atmanirbhar Bharat’ initiative along with production-linked incentive (PLI) scheme for white goods are factors triggering the stock for good. White goods are large electrical appliances used in homes like TV, refrigerators, AC and so on.

The government had banned import of ACs with a view to promote domestic manufacturing and cut imports of non essential items. This has benefitted companies to boost sales in the domestic market.

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Shares of AC makers Voltas, Havells India and Blue Star have gained 10-24% since September on hopes of strong demand this festive season.
AC Companies% YTD returns% returns as of September 22
Johnson Controls-20%-1%
Voltas47%24%
Amber Enterprises30%7%
Blue Star3%10%
Whirlpool of India-13%6%
Havells India55%12%

AC manufacturers feel that the drastic change to remote working has brought good demand from the residential space.

“Besides summers, the AC industry has seen growth because of the work from home concept. From the past 2 years, kids are also attending online classes, which also has impacted ACs’ demand. AC sales impacted mainly due to lockdown in which shops remained closed, otherwise there is no impact on demand from customers. Lower penetration, work from home concept, attractive and affordable EMI [monthly instalments] will help in increase in sales for years to come,” Kulbhushan Bhardwaj, business head, residential air conditioners, LG Electronics India told Business Insider.

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Air conditioner brands Voltas, Blue Star, Havells rally ahead of festive season
Flourish chart/Finmedium data

Aside from the import ban being a key driver to companies’ growth, analysts also see demand revival as lockdowns are lifted.

“As regional lockdowns are being lifted, demand recovery is already visible. Unlike last year, we do not see large benefits coming from pent-up demand barring the cooling products, which can see some revival in its second summer season. We see improving housing activities and resumption of capex to sustain strong revenue traction in the coming quarters,” HDFC Securities reportedly said in a consumer durables sector update.

Reportedly, around 52 companies have applied for availing production-linked incentives (PLIs) for white goods (ACs and LED lights) and committed investments of around ₹6,000 crore. This opportunity will save import cost as the majority of the components in ACs are imported from countries such as China and Taiwan. PLI scheme offers incentives on incremental sales for products manufactured in India.
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Companies including Hitachi, Voltas, Bluestar, Havells, Amber among others have applied for manufacturing critical components of air conditioners and LED lights.

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