The heatwave may not be good news for you but the AC industry is rejoicing… It is expected to deliver robust volume-led growth in Q4FY25 on the back of early onset of the summer coupled with aggressive channel stocking.
The Indian Meteorological Department has predicted above-normal number of heatwave days in most parts of the country between March and May. Most cities across India have witnessed higher temperatures between Jan-Mar so far compared to previous year and this has further added to the optimism about higher AC volume growth.
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This will benefit companies in the cooling segment, which is poised for another strong summer season. Kotak Institutional Equities said that even as most players have secured their compressor supplies for this season, some players are better placed than others. “While primary growth trends are encouraging, we would monitor (1) secondary offtakes and (2) margin delivery in the context of RM inflation, rupee depreciation and higher rebating (intense competition). In the near term, we expect margin headwinds for Voltas and Lloyd (Havells), but the latter should benefit, owing to a relatively weaker base,” the brokerage firm said in an analysis report.
Blue Star expects 30%+ industry volume growth in Q4
Blue Star’s management has highlighted that the RAC industry is expected to grow at over 30 per cent in Q4. This, Kotak Institutional Equities said, could be led by 1) early signs of a favorable summer season and 2) aggressive stocking by channels, considering the stock-outs faced last year, fears of compressor shortages and pre-buying ahead of anticipated price hikes. “While primary sales growth trends are encouraging, we would closely monitor secondary offtakes (considering the weak consumption sentiment),” it said.
Will there be a shortage of compressors?
Per media reports, there could be shortages of compressors in India due to the non-renewal of BIS licenses of foreign vendors. “The BIS license of Highly (China) is valid until June 2025 and GMCC (China) is valid until January 2026. We note that compressor imports to India grew +40 per cent YoY in April 2024 to February 2025. This should ensure that the industry does not face any major supply challenges at least in the current season,” the brokerage firm said.
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