For Voltas, rising temperatures could be cool

However, the way ahead is encouraging with the advent of summer season, which will boost demand for air conditioners. Based on data sourced from India Meteorological Department, analysts at Jefferies India said, “In the last 10 days, many districts in Gujarat and Maharashtra including Mumbai recorded daytime temperatures 5-7 degrees higher than normal.” Last couple of days, even the northern states of Delhi, Himachal and Uttarakhand recorded higher than usual temperatures for February, they added.

This augurs well for Voltas as it has a significant presence in North and the resultant demand surge would boost volumes and hence aid market share. If the overall demand continues its strong momentum, Voltas expects to take some price increases at the beginning of June quarter of FY24.

As things stand, the fall in commodity prices have not been passed on to the consumers. As such, this would provide support to margins. “Q4FY23E-Q1FY24E should see over 250 basis points margin expansion quarter-on-quarter if normal summer temperatures prevail,” added Jefferies.

Meanwhile, Voltas’ market share appears to be stabilizing and that is comforting. “Since market share has recovered, we believe the stock should retrace close to half the journey left to its peak,” said the Jefferies report. The balance journey would depend on the pace of margin movement, they added

Shares of Voltas are down nearly 33% from their 52-week highs of Rs1347.65 apiece seen in April.