AC Manufacturer’s Rise Higher On Summer Sales

In last one month air-conditioner (AC) and refrigerators manufacturing companies have shown significant gain in its stock prices. Companies like Blue Star, Voltas, Hitachi Home and Life solutions (India), Fedders Llyod Corporation have all witnessed an increase in its stock prices from 44% to 72% in last one month.

Here are the reasons why these stocks have performed well during the said period:

 The first reason for this considerable performance is rises in price of air-conditioners and refrigerators in Jan-March quarter FY14. During the said quarters these companies have increased the prices of its cooling products by 2-10% which has improved their topline. Moreover, sales volumes of these companies have also recorded significant growth due to brutal heat of the current summer season.

The above mentioned reasons have resulted in a good financial outcome for these companies in Q4FY14. If we look at the performance of the companies during the fourth quarter, topline shows a considerable growth of 15% yoy on aggregate basis to Rs 2017 crore in Q4FY14 against Rs 1749 crore in same period of last fiscal year. EBITDA grew by 36% on aggregate basis to Rs 165 crore in Q4FY14 against Rs 121 crore in Q4FY13. Moreover, bottomline of these companies witnessed an exceptional growth of 75% on aggregate basis and surged to Rs 102 crore in Q4FY14, against Rs 58 crore same period of last fiscal year.

Apart from the above mentioned reasons, there is one more reason which is bringing smile on the faces of air-conditioners and refrigerators manufacturing companies. As we know over 50% of AC parts are imported by these companies which increases its cost but due to good performance of domestic currency (appreciation of Rupee against Foreign currency) in last couple of months the cost of imported items are also coming down.

Coming to future performance of the companies, we expect that Q1FY15 and Q2FY15 will also be good. Generally, summer season in India continues till July, so due to this the companies' earning in Q1FY14 will be on the higher side. Moreover, Q2FY14 is considered as a festive season especially Diwali which will once again boost the sales of these companies.