The India Meteorological Department has forecast above-average summer temperatures and increased heat waves. This is not surprising, as India is already facing rising temperatures.
The demand for cooling products is expected to lead to record sales this year due to the early arrival of summer. High temperatures will increase the demand for air conditioners, coolers and fans.
This will benefit companies operating in the cooling segment, with the market leaders Voltas and BlueStar expected to benefit significantly. One interesting fact is that consumer durable stocks run yearly ahead of summer in anticipation of demand. So will it be this time, too? How are these companies positioned this time?
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Voltas, a Tata group company, operates in three core business segments, including Unitary Products (UPBG), which markets room air conditioners, air and water coolers and other commercial refrigeration products.
The company is a major player in the air conditioning segment, with a market share of around 20.5%. It also has a market share of 5.1% in refrigerators, 8.3% in washing machines, and 16.7% in semi-automatic washing machines.
UPBG contributes 63% to its total revenue, with the balance coming from engineering (5%) and electro-mechanical products (30%).
The revenue mix in the UCP segment was 61% from room air conditioners, 19% from commercial ACs, 15% from commercial refrigerators, and 5% from air coolers and water heaters.
Last year, Voltas sold over 2 million AC units–the highest ever AC sales and the first company in the domestic market to cross the milestone. The volume was huge, a 35% jump from the financial year 2023.
Besides room air conditioner sales, significant growth was also recorded in other cooling products, including air coolers and commercial refrigeration products.
Voltas Beko, Voltas’ home appliance brand, sold close to 2 million home appliances in FY24, and has a total market share of 10%.
Voltas’ financial performance stagnated between FY20 and FY22, with revenue ranging between Rs 71 billion and Rs 79 billion. Loss of market share and lower margins affected the company.
However, growth picked up pace in FY23, when its revenue surged 19% year-on-year to Rs 95 billion, followed by a 30% increase to Rs 125 billion in FY24.
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