Voltas, Blue Star, Havells share prices rise up to 78% in 6 months: Should you Buy, Sell or Hold the stocks?

Stock Market Today: Cooling products manufacturers as Voltas, Blue Star Ltd, Havells India and Johnson Controls-Hitachi Air Conditioning India have seen their share price rise 42-78% in last one year Other Consumer appliances and fans manufacturers as Crompton Greaves Consumer Electricals, V- Guard Industries including Havells share price have also seen good rise of 42-46% in last six months.

Strong heat wave lifts sales

While Consumer appliances and durables demand including air conditioner had remained soft in 2023, start of 2024 and good summer season have led to strong lift in demand. The channel inventories have also streamlined and earlier concerns on high channel inventories are behind. Even many regions suffering from intense heatwave saw inventory shortages. The strong demand momentum is likely to drive prospects for Voltas, Blue Star Ltd, Havells India and others share prices.

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Analysts recent channel checks indicate that industry is awash in a sales boom following the heatwave, following years of sluggish demand.

Analysts at Prabhudas Lilladher said that their channel checks indicate that Room Air Conditioner inventory levels are currently low, driven by the severe summer season. Some channels operate on an order basis with inventory holding for 15-30 days, adjusting based on demand.

Air Conditioner sales rise significantly

In March, April and May Room AC increased by 40%, 75%, and 80% YoY. The expert projects 50% YoY growth for June. Notably, a sizable portion of sales came from first-time customers. In certain Room Air Conditioner models, supply constraints were brought on by rising demand.

Channel checks by Centrum Broking in East India also indicte similar trends, Intense heat wave in Eastern region over the past three months resulted in robust demand from Room Air Conditioners. The growth was robust at 45% YoY in April and 15-20% year-on-year in May-June (partly impacted by inventory shortage) as per Centrum. Overall growth for Room Air Conditioner category was 25-30% YoY for the April-June period for the distributors in East, highlighted analysts

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Overall Consumer durable demand remains strong

Nuvama Institutional Equities data indicates that March-May period saw a 30–40% increase in cooling appliance sales. Other categories also saw growth, maintaining the upward pace with refrigerators likely to have seen growth of 20% YoY.

Price hikes to support realisations

The prices in various regions also got a lift, Prabhudas Lilladher analysts said that across various brands, there has been a price hike ranging from 3% to 5%. Their March-2024 channel check indicated that major brands such as Mitsubishi, Lloyd, and Voltas have implemented a price increase of 2-3%, with other brands following suit, as observed in their latest channel check this month.

Centrum analysts post channel checks in East India said that amidst the rising commodity prices, brands like Voltas and LG took price hike of Rs1,500-Rs2,000 per unit during the quarter. Daikin was price higher by Rs3,000 compared to last year’s summer season. All brands took price hike during the quarter, which were absorbed by the market.

Rising raw material costs, meantime, can result in a 2-2.3% price increase the next quarter too, said analysts at Nuvama

Outlook and recommendations-

Nuvama reckons that there is no oversupply in the Consumer durables industry despite PLI-led capacity expansions. Their projections indicate a 20% CAGR in demand and a 16% CAGR in supply over FY24–27. They have a Buy recommendation on Voltas.

ICICI Securities also remains positive on the white goods and durables sectors, while Havells remains its top pick.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions