The Indian air conditioner industry has witnessed notable resilience amidst broader market fluctuations, with companies like Blue Star, Voltas, and Lloyds (Havells) consistently gaining ground and trading near 52-week highs. Despite a challenging festive season for consumer durables, the sector is poised for growth, driven by strategic inventory placement ahead of peak seasons and a favourable earnings outlook fueled by lower commodity prices.
Analysts project robust volume growth for air conditioner producers in the October-December quarter of FY24, estimating a significant increase of 15-20%. Companies such as Daikin, Voltas, and Blue Star are particularly highlighted for their strong performance in primary billing. Furthermore, the decline in raw material costs by 8% is expected to bolster margins for AC companies in the same period.
Research analysts have noted market share gains, indicating a positive sentiment towards the sector. Harshit Kapadia at Elara Securities India Pvt Ltd. emphasizes the uptrend in market share for Voltas, Blue Star, and Lloyds.
Despite challenges such as higher costs impacting profitability, companies like Voltas have demonstrated resilience, with revenue from operations rising by 31% due to increased demand driven by warmer-than-usual weather. However, challenges persist, as exemplified by Voltas’ reported fall in third-quarter profit, which is attributed to increased expenses related to raw materials and services.
In the face of market volatility, analysts at BNP Paribas remain bullish on the demand trajectory, emphasizing the recovery in consumption demand and real estate activities as drivers for healthy offtake in the durables sector. They also anticipate margin recovery from FY23 lows, signalling a positive outlook for the industry.
While competition remains intense, particularly in electric consumer durables and white goods segments, analysts foresee a favourable earnings trajectory, with the sector’s earnings downgrade cycle largely behind. B2C companies like Voltas and Havells are favoured within this context.
In summary, the Indian air conditioner sector demonstrates resilience and potential for growth despite market challenges. With strategic positioning, cost management, and favourable demand dynamics, companies in this space are poised to capitalize on emerging opportunities and deliver value to stakeholders.
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