As summer looms, shares of cooling product firms heat up on bourses

Shares of cooling product companies such as Blue Star, Symphony, Voltas, Whrilpool of India and fan manufacturers such as Bajaj Electricals and Crompton Greaves Consumer Electricals are in demand with the onset of summer. These companies have gained 1.5-8.5 per cent in the last one week. Outlook is robust for most companies, except for a few.

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, topline of the companies grew at a strong 10-11 per cent year-on-year in the nine months ended December 2017 for the unitary cooling products division of Blue Star and Voltas (about 40 per cent each of total sales for both players), while it was a whopping 22 per cent for Whirlpool. Symphony’s air-coolers division reported a topline growth of 10 per cent. While Blue Star and Voltas have reported improved profitability, the same has been under pressure for Whirlpool and Symphony.

Though competition is intense in the air conditioning product segment, the overall market is also growing at a robust pace, helped now by increasing demand for inverter airconditioners. According to 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.

“The outlook on the UCP 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 on Blue Star due to impact on margins following investments in the water purifier business, according to analysts.

Whirlpool, Crompton

Equirus Securities is positive on Whirlpool as it believes that the firm’s continued focus on network distribution expansion, new product launches, and 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 Q3 and 2 per cent in January) would aid margins. JP Morgan recently initiated with overweight rating on Crompton Greaves — a prominent consumer electrical company with leadership position in fans, residential pumps and consumer lighting — due to benefits of GST, housing reforms and execution of renewed and focussed growth strategy under new management post demerger.

Electrifying returns

Bajaj Electricals has been the best cooling products stock (up 30 per cent in a month) due to expectations of a rebound in its financial performance thanks to transformation of its distribution model, which forms 54 per cent of overall revenues, and which will fully stabilise by the end of this month.

Symphony makes only air-coolers with 15 variants and is one of the largest air-cooler player in the world with market leadership position in India and presence over 60 countries.

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