Consumer durables businesses such as Voltas and Havells India saw their stock prices rise in trade on April 2, after the Met Office’s warning of a heatwave due to extreme weather conditions.
Mrutyunjay Mohapatra, Director General of the IMD, stated that temperatures in most parts of the country are predicted to be above normal from April to June. “Ten-20 days of heatwaves are expected in different parts as against normal four-right days in April-June,” he told reporters.
However, in a report, ICICI Securities refuted the assumption that the heatwave will have an influence on the revenue growth of summer products.
“While the narrative of ‘heatwaves result in higher growth of summer products (fans, air coolers, air conditioners and refrigerators)’ is popular, we believe historical data does not support this.”
Mrutyunjay Mohapatra, Director General, IMD
There were no heatwaves in India from FY02 and FY12, however there were four from FY12 to FY22. According to the brokerage business, summer product companies had a higher sales CAGR from FY02 to FY12.
“During fiscal years 1992-2002, India had three heatwaves but Voltas reported revenue CAGR of just 3.7 percent,” the report pointed out. Rather than a heat wave, important growth drivers include increased product affordability, consistent introductions of distinct items, and channel expansion.
During FY22-FY24, FMEG (fast-moving electrical goods) industries were impacted by both high inflation and deflation. The introduction of Bureau of Energy Efficiency standards, as well as sharp price increases, were significant in FY23.
For FMEG enterprises, the shift of consumers from the unorganised to organised sectors is expected to fuel revenue growth, while premiumisation should increase profitability. However, near-term performance is expected to be subdued, which might weigh on stock values.
As a result, Havells India, with the most diverse product offering and a focus on premiumization, remains ICICI Securities’ top choice.
