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With Blazing Summer Comes The Blazing Stocks

With Blazing Summer Comes The Blazing Stocks


The dust of demonetization and GST implementation on white goods industry is settled now and is on the path to recovery and Indian Meteorological Department (IMD) has forecasted a blazing summer is going to be extended till June, which has likely proven to be a golden summer for the consumer durable industry, especially the AC, Coolers, and Refrigerator maker.

Organized retailing will not only streamline the supply chain but also facilitate increased demand, especially for high-end and branded products. Air conditioners (ACs), refrigerators, washing machines, sewing machines, electric fans and other domestic goods all fall under the white goods category.

The overall market is already fast growing (11% CAGR over FY12-17) and is expected to grow over 18-20% over the span of FY17-20.

Growth in the white goods segment was largely driven by the Air-conditioner (AC) segment 

  • AC markers are expecting a growth of minimum 15-20% in 2018 as IMD predicts that summer is going to be extended until June, increasing disposable income and availability of power in smaller cities.
  • The cost of ACs has increased by 10 to 15% in current fiscal due to the implementation of new ISEER (Indian Seasonal Energy Efficiency Ratio) ratings.
  • The penetration of air conditioners in India stands at around 4%, while in China it is 60%, which itself is a huge opportunity.
  • Voltas: To cater the demand Voltas have already ramped up their production and restocking boosted across the dealer networks and enter the white goods business in a 50:50 JV with Arcelik through which it gets access to Arcelik’s wide range of white goods.

Voltas is best positioned to capture the $5 billion white goods market. A strong brand coupled with over 6,500 dealers has helped to increase its market share from 14% in FY10 to 24% in Q4FY18.

“The cost of acquisition of this segment has also decreased due to which it has become more affordable for consumers. Hence, we see an increased adoption of inverter ACs this season as well, it should contribute close to 25% of overall AC sales” –
Pradeep Bakshi, Managing Director and CEO, Voltas

  • Blue Star: In-room air-conditioners, Blue star wants to grow its market share from 11.5% to 13% this year. It has plans to invest about Rs 55 crore this summer on advertising and marketing as compared to Rs 45 crore it had spent last year. It has 150 brand stores which too will go up to 200 stores next fiscal.
  • Daikin India is expecting demand from tier II and III for its product to pick-up.

“I expect that this industry to grow anywhere between 15 to 18% on the residential side. Daikin is aiming to clock a 25% growth this fiscal because we are growing more than the market from last 8 years.” –
Kanwal Jeet Jawa, Managing Director, and CEO, Daikin

The Air cooler market industry to post 26% CAGR to Rs 21 billion over FY17-19 led by rising penetration and shift from unorganized to organized segment, which is likely to benefit segment leader Symphony.

  • Symphony is the largest player in this segment with a hold of over half of the market share, crowded by more than 70 brands in this category. With the onset of summer season, hot and dry regions are the potential markets for Air coolers.
    Electric fan penetration in rural areas is estimated at 70%, which is lower than urban areas. Higher power availability is likely to drive new fan demand in rural households.
  • Crompton is the leader in fans with 30% market share and company has sharpened its focus on the premium fan.
    Refrigerators, with one of the highest penetration levels in the consumer durable segment/white goods at 27% where Washing Machines contribute around 10% to white goods
  • Whirlpool of India (WPIL) is one of the leading players in the domestic refrigerator/washing machine segment.
    In refrigerators, it has launched a wide range of products in the Rs 50-100K category to plug key gaps with peers and has decided to opt for a Brownfield expansion in their refrigeration facilities in order to meet the incremental demand of single-door.
    They have allocated Rs 182 crore CapEx which will be utilized to increase the current capacity from 21 lakh to 27 lakh annually.
  • Godrej Industries with the growing demand and expanding portfolio, it aims to augment manufacturing capacity and is investing Rs 200 crore at its Shirwal plant in Maharashtra.
    The Shirwal plant will be adding 3 lakh refrigerators and 3 lakh washing machines in the premium segment.
    The company, which spends 5% of its turnover on marketing, has a share of 14% in the overall Rs 12,000-crore refrigerator industry. 

Stocks to Watch: Voltas, Whirlpool of India, Blue Star, Crompton Consumer, Havells India, Johnson-Hitachi, and Symphony

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