Air Conditioner Demand Set To Soar In India: 3 AC Stocks to Keep Your Portfolio Cool – News18
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With rising temperatures and heatwaves, demand for ACs in India is set to soar. Here are 3 stocks you should buy this summer
3 AC Stocks To Keep Your Portfolio Cool This Summer
Voltas, Blue Star Stock Price: The India Meteorological Department (IMD) has predicted above-average summer temperatures and more frequent heatwaves this year, which is expected to drive record sales of cooling products due to the early onset of summer. Rising temperatures will spur increased demand for air conditioners, coolers, and fans.
Consumer durable stocks typically see a boost before summer in anticipation of this demand. Will this trend continue this year? How are these companies positioned to benefit from the forecasted heatwave?
Manish Valecha, Deputy Head of Research at Anand Rathi Institutional Equities, commented, “We anticipate FY25 to be another year of strong demand for cooling products, supported by IMD’s forecast of above-normal temperatures and higher heatwave frequencies from March to May 2025. Extreme heat conditions are likely to drive a surge in demand for top air conditioning brands. Last year, we saw an unprecedented demand for room air conditioners, which resulted in record sales and market share gains for leaders like Bluestar, Voltas, and Havells. Air conditioners are increasingly being seen as a necessity rather than a discretionary purchase, with consumers shifting toward energy-efficient models.”
Valecha further noted, “The RAC industry is expected to grow by 30-35% YoY, reaching 13-13.5 million units in FY25, driven by prolonged heatwaves, higher disposable incomes, and accessible consumer financing schemes. Additionally, the tax rate cut in the FY26 Budget will further support AC sales.”
In preparation for strong demand, dealers have stocked up earlier this year, unlike last season, to avoid potential supply shortages caused by non-tariff barriers. The positive market sentiment, driven by higher temperatures in February and March, is expected to boost the growth of cooling companies.
Valecha predicts that air conditioning companies will report strong performances in Q4, with the extended heatwaves pushing stock prices up by 10-12% in the coming days. This growth will be reflected in the earnings of key players in the cooling sector. His top stock picks are Bluestar, Voltas, and PG Electroplast.
Voltas | TP: Rs 1,627
Voltas delivered strong 3QFY25 results, with a solid 18% YoY revenue growth to INR 31.1 billion, supported by a sevenfold YoY surge in EBITDA to INR 2.0 billion. However, concerns arose from a decline in UCP segment margins (5.9% vs. the expected 7.8%) and a 50bps QoQ drop in market share to 20.5%.
The company’s increased spending on promotions and advertising to boost market share impacted profitability. Despite a weaker UCP margin outlook, Voltas remains optimistic for the upcoming summer season, expecting strong demand and positive consumer sentiment to drive a 23% PAT CAGR over FY25-27.
Blue Star | TP: Rs 2,184
With 80 years of experience in India, Blue Star manufactures air conditioners and refrigerators, serving residential, commercial, industrial, and infrastructure customers. The company has expanded its footprint to over 18 international markets, including the Middle East, Africa, and South Asia, with plans to grow into North America and Europe.
Blue Star operates in three segments: commercial air conditioning (56% of total revenue), unitary products (41%), and professional electronics services. It is available at 10,200 outlets across India and is the largest after-sales service provider in the country for AC and commercial refrigeration products, holding a 14% market share in the AC segment.
Around 40% of Blue Star’s AC sales are financed through consumer finance schemes, such as zero-interest financing. Over the last five years, the company’s sales and profit have grown at CAGRs of 13% and 17%, respectively, with FY24 sales at INR 97 billion and profit at INR 4 billion.
Blue Star projects a 25-30% growth in air conditioner sales this summer, despite a high base from last year when the market grew over 57%. Given the strong demand outlook, the company expects a 30% growth in Q4 FY25.
PG Electroplast | TP: Rs 1,150
PG Electroplast, part of the PG Group, is a diversified electronic manufacturing services provider specializing in ODM, OEM, and plastic injection molding. Its wholly owned subsidiary manufactures air conditioners, coolers, and components for various consumer durables.
The company is the second-largest player in room air conditioning (RAC) finished goods sales in India, serving a large clientele.
Disclaimer:Disclaimer: The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.
