With the Met Department warning of an intense heatwave across the country for the next three months, we look at some of the sectors that may stand to gain this summer. Brokerages and financial analysts bet big on air-conditioner (AC) makers, dairy companies and consumer durables, especially fan manufacturers.

Avinash Kumar, Research Analyst at LKP Securities, told businessline, “Demand for ACs seems good as the average temperature is moving up and expected to perform well, further backed by the IMD report. It also predicted El Nino conditions to persist for most of this period which could benefit the AC market.”

According to Anil R, Research analyst, Geojit Financial Services, “Q4 usually marks a robust quarter for consumer durable companies. Given this scenario, we anticipate an exceptional year for cooling products, which may extend into Q1FY25 as well. Among our consumer durable coverage universe, we are positive on Havells, Voltas, Symphony, and V-Guard. Havells, with its exposure in ACs, coolers, and fans portfolio, is expected to be the key beneficiary. Other players in this space, such as Blue Star in ACs, and Crompton and Bajaj Electricals in the fan segment, are also likely to see an uptick in sales.”

Shares of Voltas, the titan in the AC segment, are trading at ₹1,222 (up 0.20 per cent) on the BSE. Morgan Stanley has upgraded Voltas to equal-weight from underweight and raised its target price to ₹1,160. AC major Blue Star, trading at ₹1,355.75 (up 0.60 per cent) has moved up 39.2 per cent in the last three months.

Amber Enterprises India, a key OEM/ODM for major AC brands in India, is trading at ₹3,755.40 (down 0.65 per cent). Jeffries highlights it as a top pick in the small- and mid-cap sector due to its core strengths and diversification into components. In March, CLSA upgraded the stock to ‘Buy’ with a target price of ₹4,300. The stock has moved up 21 per cent over the last three months.

However, Manoj Bahety, Founder and Fund Manager, Carnelian Asset Management & Advisors, was cautious as he said though the heatwave is sure to benefit AC stocks, the rural demand may not be very encouraging. “Sales have been positive, but revenue-wise I see the next quarter to be a flat one. Also, with some of the commodity prices (raw materials) increasing and elevated competition, margins of these companies may come under pressure,” he added.

Cool it with ice-cream

Harsh summer always bodes well for ice-cream makers and dairy companies such as Dodla Dairy Ltd and Modern Dairies . Shares of these two companies are trading at ₹851.55 (down 0.79 per cent) and ₹33.21 (down 0.15 per cent), respectively, on the BSE.

Arpit Jain, Joint MD, Arihant Capital, said, “We’ve already seen a sharp rise in sales, particularly for beverages, ice-cream, and some other products, rather than sugar itself. Therefore, we believe there’s a greater opportunity for investment in dairy companies that benefit from ice-cream sales or beverage companies like Varun Beverages (VBL), which will likely see a boost. ” Shares of VBL are currently trading at ₹1,518.25 (up 2.8 per cent).

In its March report, Axis Direct maintained a ‘Buy’ rating for the bottling major with a target price of ₹1,550 per share; while Motilal Oswal expects the company to maintain its earnings momentum and has retained ‘Buy’ rating with a target price of ₹1,600.

Rajesh Kashyap - Product Manager ( Multi Family Office) at Wodehouse Capital Advisors, said, “El Nino’s retreat brings hope for a more stable monsoon in India. Meanwhile, 2024 sees the nation’s economy thriving with declining inflation and robust GDP growth. Strategic investors navigate shifting markets, prioritising bottom-up approaches amidst warnings of bubbles from the ex-SEBI chief. This trend towards a bottom-up, fundamental-driven approach in the market, applicable to most sectors including FMCG and consumer durables, emphasises the importance of vigilance amidst geopolitical and regulatory uncertainties.”

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