Consumption Thematic: Warming up for summer - ICICI Direct

Top Picks: Havells India, Voltas and Amber Enterprises

- The consumption discretionary stocks have undergone a decent price/time correction over past few months. Within the discretionary space stocks in Air-conditioning segment look relatively better placed on technical charts and relative strength rankings, despite recent volatility in commodity prices. Historically, we have seen these stocks generating positive returns for investors during Q1 of financial year as benefitting from seasonality. We have selected the companies with blend of Relative outperformers and those oversold with favourable risk-reward setups in this report

- The RAC industry has lost two consecutive summers due to pandemic led lockdowns and unusual rains. However, the industry expects a normalised summer going forward which will help drive the demand of room air conditioners. Amber Enterprises is the market leader in the RAC OEM/ODM category with strong client base. Frontline brands such as Havells and Voltas will be one of the key beneficiaries of revival in the demand of cooling products due to their strong supply chain network and ability to pass on higher raw material prices

- Key raw material prices have inched up in the last few quarters thereby impacting margins. Accordingly, companies have taken price hikes in the range of 12-15% YTD in CY21 to offset higher raw material costs. We believe, the price hikes will be absorbed supported by strong demand of premium products and new product launches especially by the organized players

Havells India

- The discretionary consumption stocks have undergone decent correction over past few months and now forming base at key supports. Havells is poised at long term 52-week EMA with oversold readings post 30% correction from life highs, offering favourable risk-reward setup

- Key point to highlight is stock has held its 52-week EMA on numerous occasions over last decade barring 2020 and made a strong come back. In current context the stock held its key average despite sharp rise in commodity prices and made base around Rs. 1000 being a. 52-week EMA and 80% retracement of last upleg (958-1504) making it a bargain buy

Voltas

- The stock has generated a breakout above the falling supply line joining the recent highs since October 2021 (Rs. 1356) signalling resumption of up move as strong buying demand emerged from the major support area (Rs. 1100-1150) being confluence of previous breakout area and rising 52 weeks EMA (placed at Rs. 1125) thus offers fresh entry opportunity

- The stock has witnessed a faster retracement of last falling segment as seven weeks decline (Rs. 1317-1100) was completely retraced in just two weeks highlighting robust price structure

Amber Enterprises

- The stock has been resilient during the recent market correction and is at the cusp of generating a breakout above the last one year range (Rs. 3788-2711) signalling resumption of the up move and offers fresh entry opportunity

- The stock has witnessed a shallow retracement in the last 12 months, retracing just 38.2% of the preceding 12 months up move (Rs. 921-3662) signalling positive price structure and a higher base formation at rising 52 weeks EMA (placed at Rs. 3150)

For details, click on the link below:

Link to the report

Source : Equity Bulls

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