Johnson Controls-Hitachi Air Conditioning India surged 7 per cent to Rs 1,286, IFB Industries rallied 5 per cent, Voltas and Blue Star gained 4 per cent each and Symphony was up 3 per cent on the BSE in Wednesday’s intra-day trade. In comparison, the S&P BSE Sensex was down 0.82 per cent at 60,174 at 10:22 AM.
The fast moving electric goods (FMEG) companies witnessed weak rural demand amid high inflations, slow inventory build-up of winter related home appliances. However, going forward, analysts believe the EBITDA margin will see further recovery from Q4 onwards supported by improved operating leverage and easing inflationary pressure on raw material prices.
Meanwhile, IMD recently issued the first heat wave alert of 2023. Normally, March is when temperatures rise but in February itself the trends are showing. Dealers are highlighting that lower commodity prices have not been passed on in pricing. This points to improved volume and margin outlook for Voltas (28 per cent 1-yr underperformance to Nifty) ahead, analyst at Jefferies said in stock update. The brokerage firm believes FY24E should see both AC and Engg segments of Voltas being in a sweet spot.
AC inventory at the dealer level is comfortable, despite weak 3Q demand where the industry saw barely 2 per cent YoY growth. Hikes taken in 1HFY23 have not been rolled back, even with the softening of commodity prices. Given this, 4QFY23E-1QFY24E should see 250 bps+ margin expansion QoQ if normal summer temperatures prevail. Market share being stable at 22.5 per cent vs 22.8 per cent QoQ in Q3 is a comfort, analyst said.
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