AC Demand Likely To Pick Up In Q1FY20 After Prolonged Winter Dampened Q4 Sales

Consumer durable firms are pinning their hopes on a spike in air conditioner sales in the first quarter of FY2019 after a prolonged winter in North India pushed sales by two weeks earlier this year, brokerage firm Edelweiss said in a report dated April 23.

As a result, air conditioner sales remained flat or dipped in the negative in parts of north India.

“A strong summer in South India has fuelled robust AC sales. However, elongated winters took a toll on demand in other regions, leading to growth being flat to marginally negative. Elongated winters have pushed AC demand to Q1FY20, wherein dealers anticipate higher growth in the range of 20-25% year-on-year on a low base (reflecting in demand spurt in April),” Edelweiss said in its note.

India’s air conditioner market is estimated at over 7 million units. It is likely to grow on the back of rising penetration, urbanization and higher disposable incomes, according to estimates by brokerage firm Motilal Oswal.

However, growth in the fourth quarter demand in parts of India remained sporadic.

Even as markets in south India reported strong sales, a long winter in North caused a slump in sales in the first half of March. “Season in northern parts of India has shifted by 20-25 days due to elongated winters. Sales in first 15 days of March were down 30-40% and the last seven days saw pick up with flat-to-marginally negative overall growth in Q4FY19. April is expected to see good growth with summers becoming hotter (30-40% growth estimated on a low base). However, the trend in South was positive that saw month on month sales grow by 200%,” the report noted.

So far, consumer durable firms have held on to any price hikes for the summer and have curbed excessive advertising spends to expand margins, Edelweiss said in its note.

Among other white goods categories such as washing machines and refrigerators, Edelweiss noted that the market for refrigerators slowed down in Q4FY19, but it picked up from the last week of March and in April. As for washing machines, the category registered a flat growth in Q4FY19. Edelweiss expects flat growth for the category in Q1FY20 as well.―Livemint

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