With the India Meteorological Department (IMD) issuing warning on possible heatwaves in multiple geographies in coming months, all eyes are on are summer stocks.
Many white goods companies such as air conditioner maker Voltas Ltd or cooler maker Symphony, fan and cooler maker Havells India and maker of refrigerators Whirlpool of India rely on summer sales.
Shares of Voltas Ltd climbed over 3 per cent today and are up 22 per cent in 2024 so far. Havells India is up 13.38 per cent year-to-date. Symphony shares climbed 9 per cent today and are up 8.3 per cent this year.
ICICI Securities said while the narrative of ‘heatwaves result in higher growth of summer products such as fans, air coolers, air conditioners and refrigerators is popular, historical data does not support this.
This brokerage expects near-term performance of white goods companies to muted and may weigh on stock prices.
"There were no heatwaves in India in FY02-FY12 whereas there were four heat waves during FY12-FY22. However, revenue CAGR during FY12-FY22 was lower than revenue CAGR during FY02-FY12. We also note there is negligible correlation between heatwaves and revenue growth of companies selling summer products even on an annual basis," the brokerage noted.
ICICI Securities said heatwave, if any, in FY25 may not lead to higher growth rates but favourable base due to monsoon in base quarter and lower trade inventory augur well for higher volume growth in FY25.
"We believe stable pricing and negligible regulatory changes (e.g. BEE norms, etc.) also bode well for the growth of the sector. We remain positive on white goods and durables sector.
Overall, the brokerage stayed structurally positive on white goods and durable sector led by strong return ratios and healthy growth potential on low penetration levels. Migration from unorganised to organised sector is likely to drive revenue growth and premiumisation should boost profitability, it said.
That said the believe near-term performance is likely to be muted and may weigh on stock prices. Havells India, with the most diverse product portfolio and thrust on premiumisation, remains its top pick.