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Rising temperatures send AC makers’ stocks to record highs

LiveMint logoLiveMint 29-03-2017 Ami Shah

Mumbai: The early onset of summer and heat wave conditions in parts of India are sending stocks of air-conditioner makers to record highs.

Shares of AC manufacturers Blue Star Ltd, Whirlpool of India Ltd, and Voltas Ltd hit a record high on Wednesday. These stocks have risen 36.9%, 33.5%, and 25.8%, respectively, for the year to date, while so far in March, they have rallied 15.4%, 14.5% and 11%, respectively.

The India Meteorological Department (IMD) has already warned of heat wave conditions in Rajasthan, Uttar Pradesh, Chandigarh, Haryana, Delhi, Gujarat, Madhya Pradesh and Chhattisgarh, according to the weather forecaster’s website.

Temperatures have surpassed the 40-degree Celsius mark in states such as Gujarat, Rajasthan, Madhya Pradesh and parts of Maharashtra, according to private forecaster Skymet Weather.

“With such heat wave conditions, it is apt to say that summers have made an early visit,” Skymet said on its website.

Bhira in Maharashtra is the hottest town in India with a maximum temperature of 46.5°C, it said.

“Penetration of ACs is low in our country. We see these stocks coming into vogue at the onset of summer. As summer progresses, these stocks tend to follow how new product launches shape up,” said Gautam Duggad, head of research at Motilal Oswal Securities Ltd. “People will now wait for management commentary when March quarter results are announced.”

Symphony Ltd touched a one-year high on Monday, after logging 31.4% gains so far this year. Bajaj Electricals Ltd, which manufactures air-coolers among other appliances, saw its stock jumping 45% year to date.

In comparison, BSE’s benchmark Sensex gained 10.91% and 2.74% year to date and month to date, respectively.

“Typically, the best part of the year when we see sales jumping for air-conditioners is March-June. We saw a similar surge in sales last year. The more hue and cry we see around heat waves, the more we see these stocks rising,” said an analyst with a domestic brokerage firm who did not wish to be named.

“Initially, LG was very aggressive in inverter AC pricing, and there were concerns. However, if the summer continues to be as intense as it is now, it should not worry the other rivals as much,” he added.

Stocks of beverage and ice-cream makers were also trading firm as consumption rose because of the scorching heat.

Shares of ice-cream maker Vadilal Industries have gained 94% and 39.4% year to date and month to date, respectively. Manpasand Beverages Ltd has jumped 30.6% so far this year.

“Beverages and ice-cream also tend to benefit from high temperatures. A lot of these categories also depend on new launches, promotions and offers,” said Duggad.

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