Heatwave Alert: Top Stocks to Watch as AC Demand Soars!

Haier India plans to significantly increase its domestic capacity from 1.5 million to 4 million units, aiming to become a US$ 2 billion brand in the next 3-4 years. BlueStar, a major player in the AC market, is targeting a 19% CAGR in AC sales. The IMF has warned of potential heatwaves in Gujarat, which could further drive AC demand. Last year’s record-breaking heatwave resulted in a surge in sales, especially in tier 2 and tier 3 cities, and supply chains were overwhelmed. This year, brands and suppliers are preparing for even higher demand.

The growing middle class in India is driving the rise of consumer durables like ACs, especially with affordable electronics and better connectivity reaching smaller towns. Regional brands such as Aditya Vision Ltd and Electronics Mart India are capitalizing on this trend. Additionally, contract manufacturers like PG Electroplast, Amber, and ePack Durables control much of the AC supply chain. Localization of the supply chain is becoming critical to meet this rising demand and reduce reliance on imports. Companies like Styrenix and Supreme Petrochem are working towards self-sufficiency in manufacturing to support India’s growing consumer market.

Heatwave Alert: Top Stocks to Watch as AC Demand Soars!

Haier India has set its sights on increasing its domestic production capacity from 1.5 million to 4 million units, with a strategic goal of transforming into a US$ 2 billion brand within the next 3 to 4 years. To achieve this, the company plans to invest Rs 10 billion in building a new air conditioner (AC) plant between 2024 and 2028. This ambitious growth is aligned with Haier’s focus on expanding its footprint in India’s rapidly growing consumer electronics market, particularly in the air conditioning segment.

Meanwhile, BlueStar’s management remains optimistic about its future prospects in the AC market, projecting a compound annual growth rate (CAGR) of 19% for its air conditioners. This forecast reflects the company’s confidence in the enduring demand for ACs, especially in emerging markets. The strong growth potential comes against the backdrop of the IMF’s heatwave warnings in Gujarat, where last year’s extreme heatwave drove a significant surge in AC sales, especially in tier 2 and tier 3 cities. The unexpected increase in demand caught many brands off guard, as these regions experienced a shortage of available units.

In response to the growing demand for ACs, supply chain players are working to be better prepared for future challenges. The demand for air conditioners has been rising not only due to heatwaves but also as a result of India’s expanding middle class, which increasingly sees ACs as a necessary household item rather than a luxury. The economic growth and rising incomes across smaller towns, facilitated by better connectivity and access to affordable consumer electronics, are further fueling this trend.

Several prominent brands, including BlueStar, Voltas, Haier, and Daikin, are capitalizing on this growth by expanding their reach into smaller cities and towns. In addition to these major players, regional companies like Aditya Vision Ltd, based in Bihar, and Electronics Mart India Ltd, operating in southern states, are also seizing the opportunity to tap into the increasing demand for air conditioners. Their regional expertise allows them to cater to specific market needs and preferences, providing competitive offerings in these rapidly developing areas.

On the manufacturing side, contract manufacturers such as PG Electroplast, Amber, and ePack Durables play a crucial role in meeting the ODM (Original Design Manufacturer) requirements for the room air conditioner (RAC) industry, controlling over 90% of the market. These companies benefit from the growing demand and provide essential support to the larger brands by ensuring the availability of high-quality components and assembly services.

However, to fully leverage the booming demand for air conditioners and other consumer durables, there are key challenges to address, particularly in the area of supply chain localization. A shortage of critical components like compressors could hamper the production and availability of air conditioners, potentially limiting the growth of the industry. Additionally, the tightening of Bureau of Indian Standards (BIS) regulations is making Chinese imports less competitive, highlighting the need for India to become more self-reliant in producing key components. Greater self-sufficiency in the manufacturing of ACs and other consumer durables will be crucial for India’s long-term growth in this sector.

To drive self-reliance, companies like Styrenix Performance Materials, a leader in the production of ABS and SAN materials, are working toward import substitution and expanding their market presence. Styrenix’s recent acquisition of Ineos Styrolution Thailand Co. aims to leverage technological advancements and geographic synergies to support the local manufacturing of components for the air conditioning and consumer electronics industries. Other notable players in the engineering plastics sector, such as Supreme Petrochem and Bhansali Engineering Polymers, are also focused on value addition and maintaining strong financial health, ensuring they can contribute to India’s push for self-sufficiency in consumer durables.

For investors and industry watchers interested in the consumer durables and discretionary consumption sectors, these companies represent promising opportunities, especially during market corrections. As the industry continues to evolve, keeping an eye on supply chain dynamics, localization efforts, and regional growth trends will be key to understanding the sector’s future trajectory.