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MOSL: ROOM AIR CONDITIONERS-ACREX 2018-Inverters the key focus category in room air conditioners

Room Air Conditioners: ACREX 2018; Inverters the key focus category in room air conditioners

 

We visited ACREX, South Asia’s largest exhibition on Heating, Ventilation and Air Conditioning products. We present key takeaways from our meetings and interactions with various OEMs and suppliers.

• Overall industry growth is seen at 10-15% in CY18, with the share of inverters expected to rise to 35-40%. Summers have been strong in CY16/CY17 and a similar trend is expected in CY18 as well.
• With the surge in raw material prices over the last few quarters, players have taken 4-6% price hikes. Highly India, the second largest compressor supplier in India, has taken 10-12% price hikes on its compressors.
• Competitive intensity in the industry continues to be high - Daikin has cut prices to be at par with Voltas/ Blue Star and is looking to aggressively take market share from the incumbents.
• The new energy rating from January 2018 has increased the entry price for room air conditioners for the consumer - the earlier 5-star has become the new 3-star. Moreover, all 4/5-star models under the new rating will be inverters, while 2/3-star models will be fixed ACs. The 3-star rating will have both fixed and inverter models.
• The Real Estate sector remains weak and this is impacting the demand for HVAC products (both residential and commercial). Government infrastructure spends in Metro, Rural Electrification, Airports, Water/Wastewater is driving demand.
• Inventory in the channel is high, as companies have offloaded the old energy rating models into the channel in 3QFY18. Primary sales are likely to be weak in 4QFY18 as has been the case historically after new energy ratings.