The brokerage believes demand remains healthy enough to support further price increases, although margins are still under pressure.
Keshav Lahoti, Research Analyst – Institutional Equities at HDFC Securities, said channel checks confirm that Voltas has increased prices by 2–3% in July, an unusual move as the industry is typically in its off-season.
“Our channel check confirms Voltas have taken up 2–3% price hike. Talking from the start of the year, the price hike in RAC industry has been around 10%, but that has been taken to offset the tariff change and the high commodity inflation,” he said.
Despite these increases, Lahoti said the industry has not yet been able to fully recover the impact of rising input costs.
“Whatever the price hike industry has taken is not sufficient to pass on the entire cost inflation. Still, industry need to take more 3–4% price hike to completely offset the cost inflation.”
He added that demand is not a concern for the industry. A Amber Enterprises, a favourable base compared to last year and lower-than-normal rainfall have supported air conditioner sales, giving manufacturers confidence to raise prices even after the peak season.
“Demand is doing fine… Demand is not a concern, but we are surely cautious on the margin side because of the cost inflation.”
Beyond air conditioners, Lahoti said Dixon Technologies appears to be preparing for an eventual initial public offering (IPO) of its electronics manufacturing subsidiary after undertaking restructuring steps, including transactions involving ILJIN Electronics and a bonus issue. However, he believes it is still too early to assign a valuation because there is uncertainty over whether the Oppo business will sit under ILJIN Electronics or Amber.
On Orient Electric, Lahoti said the regulatory approval for its long-awaited joint venture with Vivo is a positive development. HDFC Securities expects the joint venture (JV) to contribute around 9 million smartphone units this year and 20 million units next year, with commercial production likely to begin after the integration process is completed.
He does not expect Amber’s entry into mobile manufacturing through the Oppo partnership to impact Dixon in the near term, as the volumes are largely incremental. However, over the medium to long term, Amber’s move into smartphones could become an important growth driver as the company looks to diversify beyond room air conditioners.
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Lahoti noted that Amber’s RAC business is now expected to grow broadly in line with the industry, unlike in previous years when it consistently outperformed. Expanding into mobile electronics could therefore help the company accelerate its long-term growth.
Among his preferred stocks, Lahoti named Eureka Forbes and Syrma SGS Technology in the consumer durables space, while Syrma SGS Technology remains his preferred long-term pick in electronics manufacturing services, although he advised investors to consider buying on market corrections.
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