Shares of cooling products companies such as Blue Star, Symphony, Voltas and Whirlpool of India and that of manufacturers of fans —Bajaj Electricals and Crompton Greaves Consumer Electricals— are in demand with the onset of summer. Barring Voltas, these companies’ share prices gained in the range of 0.7-0.9 per cent in a negative market with the benchmark and broader markets ending down by over 1 per cent. Voltas ended marginally down by 0.06 per cent.

These companies have gained 1.5-10 per cent and 2-26 per cent in the last one week and month respectively. Stock performance-wise, air conditioner players have been doing better than those in other categories (except Bajaj Electricals).

While the companies are already on a strong footing, the onset of summer will further improve the financial performance, said analysts.

According to data provided by Capitaline, the topline grew at a strong 10-11 per cent year-on-year for the nine months ended December 2017 for unitary cooling products division of Blue Star and Voltas (about 40 per cent each of total sales for both players) while it was 22 per cent for Whirlpool. Symphony reported a topline growth of 10 per cent. While Blue Star and Voltas have reported improved profitability, Whirlpool and Symphony have been under pressure.

Though competition is intense in ACs, the overall market is also growing at a robust pace helped now by increasing demand for inverter air conditioners.

As per the Indian Society of Heating, Refrigeration and Air conditioning Engineers, inverter ACs contributed 25 per cent of total AC sales in CY17 and this is projected to jump to 40 per cent in CY18. Most AC manufacturers reported strong financial performance in the December 2017 quarter helped by 4-6 per cent price hikes.

View on Voltas, Blue Star

“The outlook on unitary cooling products segment remains healthy, driven by low penetration of ACs, market leadership of Voltas and a strong margin profile because of economies of scale,” said Nirmal Bang on Voltas. Outlook is less bullish for Blue Star due to impact on margins because of investments in water purifier business, according to analysts’ views.

Equirus positive on Whirlpool

Equirus Securities is positive on Whirpool as it believes continued focus on network distribution expansion, new product launches, upgrades of existing products would help the company maintain the strong sales momentum, and lead to market share gains. Further focus on profitability with timely price hikes (3 per cent in the third quarter and 2 per cent in January) would aid margins.

Govt boost for Crompton Greaves

JP Morgan recently initiated coverage with overweight rating on Crompton Greaves—consumer electrical company with a leadership position in fans, residential pumps and consumer lighting. It said Crompton Greaves stood to gain from government measures (housing reforms, increasing electrification, GST-led formalisation) and execution of renewed and focused growth strategy under a new management post the demerger.

Betting on turnaround

Bajaj Electricals has been the best cooling products stock due to expectation of a rebound in its financial performance thanks to transformation of its distribution model in the consumer durable business, which forms 54 per cent of overall revenues.

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