Stocks of AC makers, dairy firms may sizzle amidst heat-wave warning
Analysts expect consumer durables to have a strong Q4, which is likely to extend to Q1 FY25 as well
With the Met Department warning of an intense heatwave across the country for the next three months, brokerages and analysts are betting big on airconditioner (AC) makers, dairy companies and consumer durables, especially fan manufacturers.
Avinash Kumar, Research Analyst, LKP Securities, told
“Demand for ACs seems good as the average temperature is moving up and expected to perform well, further backed by the IMD report, which predicted El Nino conditions to persist for most of this period.” 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 VGuard. “Havells, with its exposure in ACs, coolers, and fans portfolio, is expected to be the key beneficiary. Others such as Blue Star in ACs, and Crompton and Bajaj Electricals in the fan segment, are also likely to see an uptick in sales.”
Morgan Stanley has upgraded Voltas to equalweight from underweight and raised target price to ₹1,160. Blue Star has moved up 39 per cent in the last three months.
Amber Enterprises India is a key OEM/ODM for major AC brands. Jeffries highlights it as a top pick in the smalland midcap sector due to its core strengths and diversification into components. CLSA upgraded the stock to ‘Buy’ with a target price of ₹4,300. The stock has gained 21 per cent over the last three months.
WORD OF CAUTION
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 revenuewise 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.
ICECREAM
Harsh summer always bodes well for icecream makers and dairy companies such as Dodla Dairy Ltd and Modern Dairies .
Arpit Jain, Joint MD, Arihant Capital, said, “We’ve already seen a sharp rise in sales, particularly for beverages, icecream, and some other products, rather than sugar itself. Therefore, we believe there’s a greater opportunity for investment in dairy companies that benefit from icecream sales or beverage companies like Varun Beverages (VBL), which will likely see a boost.”
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.