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As the summer months set in and Indians are sitting at home due to Covid-led restrictions, there are chances that search for ideal cooling solutions like air conditioners may boost the bottom line of select listed companies. On the other hand, if you are an equity investor, and you are able to time it right, you can think of stocks like Voltas, Blue Star, Whirlpool, Johnson Controls-Hitachi Air Conditioning and Amber Enterprises which have already rallied up to 177% since March 2020 lows. The benchmark BSE Sensex has gained 83% during the same period.
With Covid-related restrictions imposed by states hitting sales in the ongoing quarter, companies are also pinning hopes on extended summer and brighter festival season to match the revenues posted in the previous years.
Which stock to buy this summer season?
Voltas: The Tata Group company and leading air-conditioner manufacturer last week reported a 49% growth in its consolidated net profit at Rs 239 crore for the quarter ended March 31. Its consolidated net profit was Rs 160 crore in the January-March quarter of the last fiscal.
In spite of disruptions caused by the coronavirus pandemic in the first half of the last fiscal, the company recovered well in the latter half on account of a stellar performance by its cooling products business.
Brokerage Phillips Capital has a ‘Buy’ rating on Voltas with a price target of Rs 1,115. “In the short term, the second wave of Covid impacting the secondary and primary billing. Additionally, a sharp increase in commodity prices will impact the margin. Resulting we have cut our FY22 earnings estimates by 9.4%. However, we expect with unlocking Voltas will gain back its volumes mainly because of strong brand recall and positioning. In the medium to long term, we expect Voltas will benefit from long-term demand drivers for AC sale, AC PLI on components, continuously strengthening its market-leadership position,” Phillips Capital said.
Amber Enterprises: The company is engaged in the business of manufacturing a versatile range of products including air conditioners, microwave ovens, washing machines, refrigerators and heat exchangers, among others. Brokerage Axis Securities said that it expects Amber to register revenue and earnings CAGR of 15.4% and 21.8%, respectively over FY20-23E. It also believes that the near-term order outlook remains strong for RAC as well as mobility solutions. Axis Securities has a target price of Rs 3,660 for Amber Enterprises. Shares of the company traded 0.89% lower at Rs 2929.35 at around 11.11 am (IST).
Blue Star: According to YES Securities, Blue Star is estimated to deliver double-digit CAGR revenue growth on the back of improved execution of projects, market share gains in-room air conditioning (RAC), continued growth momentum in packaged air‐conditioners and commercial refrigeration. Profitability is set to improve on cost control initiatives and reduction in working capital requirements. “We now pencil in revenue, EBITDA, PAT CAGR of 21%, 39%, 66% over FY21‐23E. We have SoTP based price target of Rs 800 assigning 40x to unitary products and maintain reduce rating on high valuations,” YES Securities said.