Lockdown extension hits AC sales; stocks sweat

Coronavirus and lockdown has left all businesses with uncertainty and troublesome environment for the entire current calendar year. But air conditioner industry in particular has faced much worst scenario.

The markets have seen a high volatility with fall of 30 per cent from its January high in March to 12 per cent rise in April. Many stocks have rallied as much as 100 per cent in this bounce back. The average returns of listed companies such as Blue star, Voltas and Amber enterprises stayed down at 3.2 per cent. The benchmark index Sensex, on the other hand, has appreciated as much as 19 per cent during the same period. Blue Star and Voltas has given negative seven per cent returns each. Owing to approximately 40 per cent exposure to AC components, Amber enterprises has managed five per cent positive returns.

The analysis of the historical result shows that these companies make nearly 60 per cent to 65 per cent of annual revenues in Q4 and Q1. The lockdown had already affected the sales of almost the entire month of March. The sentiments got further impacted due to the news flow that Coronavirus spreads rapidly in low temperatures.  As on May 15, only Blue Star has reported fourth quarter numbers, with 19 per cent YoY drop in sales. The lockdown will further hit another month sales. This may virtually wash out FY21E in terms of top-line.