With the temperature rising and the India Meteorological Department (IMD) predicting a good summer, Jefferies anticipates that some midcap firms producing fans, air conditioners, freezers, agri pipes, air coolers, and pumps will emerge as major winners from the increase in demand. For six businesses, including Crompton Greaves Consumer Electricals, Havells India, V-Guard Industries, Amber Enterprises, Finolex Industries, and Supreme Industries, Jefferies forecasts a 4% increase in sales and a 110 basis point sequential increase in operating profit margin in the March quarter.
“We foresee Crompton Consumer, Havells India, V-Guard, Amber, Finolex Industries, and Supreme Industries as key beneficiaries of a good summer. We think Supreme Industries is one of the best. Yet, because to overvalued assets and persistent margin deterioration, we continue to hold onto Havells and Whirlpool of India. Supreme Industries saw a volume gain of 35% during the same period, compared to 20% for Astral’s (Hold) 9MFY23.
Recall that IMD predicted a hot summer (March to May) with temperatures above average in the majority of North East, East, Central, and some areas of North West India on February 28. Much of North West, West, Central, and some portions of East & North East India are anticipated to see below average rainfall.
“Fans, air conditioners, refrigerators, pipes (mostly in agriculture), air coolers, and pumps are important industries in our coverage that could profit from a successful summer. Typically, Q4 (Jan-Mar) sales represent 30–35% of their yearly mix. Additionally, pre-monsoon is typically the peak time for building (tiles, pipes). Given better operational leverage (volumes, prices, “It read.
ACs, freezers, and fans, according to Jefferies, are important summer-specific products. According to the report, Crompton Greaves Consumer has a market share of 28% in fans and a market share of over 25% in domestic pumps.
It claimed that Havells India has been generating strong sales in the Lloyd market, with over 18% of its mix over the previous four to five quarters, hinting to volume market share gains.
A hotter summer may be advantageous for V-stabilisers Guard’s (20% of sales), fans, and pumps, the company stated. In comparison to air conditioners, refrigerators and washing machines account for 60–65 percent of Whirlpool of India’s mix.
According to Jefferies, air coolers are also sold by Crompton, Havells India, and V-Guard. “We anticipate that these companies will experience average Q4FY23 sales growth of 10% YoY and OPM expansion of 70% bps QoQ. According to historical study, the summer (Q4–Q1) season has good seasonality for sales and profitability “It read.
According to Amber, the company has a 70% market share in India’s contract production of air conditioners.
It might be seen as a demand aggregator for India’s underdeveloped AC market. According to Jefferies, Amber would see a 15% YoY increase in Q4 sales and a 70% QoQ increase in Ebitda margin.
“Summers are typically directly associated with offtake in agri-pipes and pumps. With 70% of the market share for agri-pipes, Finolex Industries dominates the industry. Pipes account for 65% of sales at Supreme Industries, which offers a diverse product mix (25 per cent of pipes is agri-pipes). Astral, on the other hand, is primarily found in the plumbing industry and is barely noticeable in agriculture. PVC resin appears to be stabilising presently on the margins. As a result, we anticipate 15% YoY growth in Q4 revenues and a 210 basis point increase in QoQ Ebitda margin “It read.
source from: msn.com
