Summer Time! These Three Stocks May See Upside - Motilal Oswal Lists 3 Shares

The Indian air conditioning (AC) industry is experiencing robust demand, driven by rising temperatures and increasing disposable income. According to Motilal Oswal Financial Services, industry volumes grew by 12% year-on-year (YoY) in FY24, reaching approximately 9.4 million units. 

The firm projects a 19% compound annual growth rate (CAGR) between FY24-27, with an expected 35-40% YoY growth in FY25.

A research analysis by Motilal Oswal states that three stocks—Voltas, Havells India, and Amber Enterprises—are ideally positioned to profit from this seasonal increase in demand for cooling solutions.

Amber Enterprises Positioned for Growth

Amber Enterprises is well-placed to capitalize on the rising demand for room air conditioners (RAC). The company has secured a strong client base and is navigating compressor shortages efficiently by securing supplies from alternative sources. 

Amber’s consumer durable division recorded a 62% YoY revenue growth in the first nine months of FY25, driven by a shift from gas charging to full original design manufacturing (ODM) and original equipment manufacturing (OEM) solutions.

"We expect Amber to continue to benefit from growth in the RAC segment and faster expansion in the electronics segment," Motilal Oswal stated. The firm maintains a BUY rating on Amber with a target price (TP) of ₹7,800.

Voltas Maintains Market Leadership Amid Challenges

Voltas remains the market leader in the RAC segment with a 20.5% market share as of December 2024. While acknowledging supply chain challenges, the company has taken strategic steps like securing short-term sourcing agreements and optimizing inventory. 

Voltas' BUY rating is reaffirmed with a TP of ₹1,710, expecting a CAGR of 12% in revenue, 20% in EBITDA, and 23% in adjusted PAT over FY25-27.

Havells Strengthens Market Presence with Lloyd

Havells has the largest total addressable market (TAM) of over ₹2.2 trillion among listed consumer durable firms. Its acquisition of Lloyd in 2017 has expanded its presence in large home appliances, particularly air conditioners, refrigerators, and washing machines. With continued investment in manufacturing, R&D, and brand-building, Lloyd has emerged as one of the top three RAC players. 

However, competition remains stiff in the non-AC segment. The stock is currently rated Neutral with a TP of ₹1,650.

Outlook On the AC Industry

Several government initiatives have strengthened the domestic AC market, including a ban on fully assembled AC imports with refrigerants, a Phased Manufacturing Program (PMP), and a Production-Linked Incentive (PLI) scheme for AC components. As a result, the value addition in the domestic AC sector has surged from 25% (before the PLI scheme) to 60%, with a target of 75% by FY27. 

With strong demand projections, favorable government policies, and strategic investments by key players, the AC industry is set for significant growth in the coming years. Market leaders like Amber, Voltas, and Havells are well-positioned to benefit from this momentum, offering promising investment opportunities.