FREE

MOSL: Morning India (18/April/18): 1. Room Air Conditioners (CY18 to be another year of strong industry growth); 2. Nestle India (Annual Report Update); 3. GRUH Finance (Steady quarter); 4. EcoScope

MOrning India (18/April/18): 1. Room Air Conditioners (CY18 to be another year of strong industry growth); 2. Nestle India (Annual Report Update); 3. GRUH Finance (Steady quarter); 4. EcoScope

 

Today’s top research Theme

Room air conditioners: CY18 to be another year of strong growth; Inverters’ share to rise to 50% by FY20

• With the Indian Meteorological Division forecasting above-normal temperatures in the CY18 summer season across most parts of the country, we expect continued strong momentum in room AC sales. Led by healthy demand, the room AC industry is likely to grow at 15% in FY19.
• We expect inverter ACs to account for 50% of industry sales by FY20. Three key factors are expected to drive the shift toward inverter ACs: (1) narrowing price gap between fixed and inverter ACs, which now stands at only INR3,000-4,000, 2) free installation (INR1,500/unit) and a comprehensive 3-5 year warranty on inverter ACs and (3) rising electricity prices, which may persuade consumers to look for energy-efficient inverter ACs.
• We prefer Blue Star (Neutral, TP: INR880, 35x FY20E UCP segment EPS, which we value at INR720; INR160 for the remaining business) over Voltas (Neutral, TP: INR660, 35x FY20E UCP segment EPS, which we value at INR530; INR130 for the remaining business).

Piping hot news

Rupee tanks to near 7-mth low of 65.64 a dollar

• The rupee extended its losing run for the second straight day, falling by another 15 paise to end at a near 7-month low of 65.64 against the US dollar amid persistent capital outflows and a fresh ripple of geopolitical tensions. Headwinds in the form of consistent widening in the trade deficit accompanied by portfolio outflows amid unsupportive global factors kept overall sentiment highly bearish.