On April 2, the shares of consumer durables like Havels and Voltas increased. This happened post warning of a heatwave due to extreme climatic conditions by the Met Office. And the interesting correlation cannot be ignored.
In a recent post, the IMD Director General Mrutyunjay Mohapatra was seen quoting “temperature will be above normal during the months April to June in most parts of the country. Ten-20 days of heatwaves are expected in different parts as against normal four-right days in April-June”
The air cooler and air conditioner manufacturing leaders Voltas saw the surge in share up to 5.4 intraday while electrical goods company Havels jumped to 2.5 percent.
Heatwave 2023- The Experts suggest otherwise
To everyone’s disappointment, ICICI Securities have debunked the claim of heat wave raising the shares of Havels and Voltas. They hinted that heat waves won’t have any impact on the revenue growth of summer consumer products.
In another report, a broking firm said “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”
Read more about heatwave temperatures in India here.
The facts
The facts actually side with experts debunking the heat wave myths. There were no heat waves during FY02-FY12. However, there were four different heat waves during the FY12-22. However, the summer consumer product companies saw maximum CAGR revenue during the year FY02-FY12.
Another report points out “During fiscal years 1992-2002, India had three heatwaves but Voltas reported revenue CAGR of just 3.7 percent”.
Interestingly, key growth drivers are not the heat wave, but rather things such as an increase in the affordability of products, consistent releases of distinct items, and expansion of distribution.
The enterprises that deal in fast-moving electrical goods (FMEG) were affected by an early period of high inflation and a subsequent period of deflation during the fiscal years 22 and 24. Significant price increases and the introduction of instructions from the Bureau of Energy Efficiency were both important factors in the fiscal year 23.
The shift of customers from the unorganized sector to the organized sector is anticipated to fuel revenue growth for FMEG enterprises, and premiumization should increase profitability for these businesses. On the other hand, the performance in the near term is anticipated to be modest, which may have an impact on stock prices.
ICICI Securities continues to recommend Havells India as their top choice since it has the most varied product range and a strong emphasis on premiumization.
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