D-Street feeling the heat of global crisis, but these stocks can be coolants to your portfolio

It’s this time of the year that consumer discretionary and durable goods companies eagerly wait for as consumers step up spending on cooling products to beat the heat.

So be it an air conditioner or an ice cream maker, the April to July period is traditionally better than other months due to higher sales.

For companies such as Amber Enterprises India, Blue Star, Voltas, and Whirlpool of India, about 70% of the annual primary sales of their products like air conditioners, air coolers, and refrigerators take place in the first six months of a calendar year. In fact, March-May accounts for 50% of this.

Last week, Voltas said that it saw a strong uptick in primary sales in February due to the

ongoing heatwave, with temperatures being 1-2 degree Celsius higher than that of last year.

Unitary cooling products made for close to 70% of the overall revenue for Voltas in FY22, and for Blue Star, they were a little over 48%. Voltas expects secondary sales to kick in from April and sees industry witnessing a volume growth of 10% in FY24.

The last 3-4 years has been tough for cooling product makers as pandemic and inflation hurt sales in the peak season. However, it is expected to reverse this year

What should investors do?
BNP Paribas is bullish on Voltas considering the growth prospects. “We retain our SoTP-based target price of Rs 1,005 and continue to prefer Voltas as our top pick to ride the upcoming summer season.” Year-to-date, the stock has given more than 6% positive returns, whereas Nifty 50 has given negative returns of 6%.

Considering the decent earnings growth, higher volume and improved business visibility over the medium-term, Reliance Securities has a “buy” rating on Blue Star stock with a target price of Rs 1,015. Blue Star has outperformed Voltas and has given 21% returns year-to-date.

Similarly, analysts are bullish on Crompton Greaves Consumer Electricals. The average target price for the stock is Rs 436.82, which represents an upside of over 55% from the current levels.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)