Speaking to CNBC-TV18, Gori noted that while brands have announced price increases ranging from 4% to 8% across various categories in recent days, these adjustments remain insufficient to fully mitigate the rising costs. The industry is facing its third round of price hikes in 2026, with the latest increases taking effect on October 1.
“It is a must for the brands to take price hikes given that there is unprecedented impact on the input cost,” Gori said. “However, we believe this quantum of price hikes still are not sufficient enough to take care of the entire input cost pressures that the brands are witnessing.”
To return to the normalised margin levels seen until the October-December 2025 (Q3FY26), further pricing action will be necessary. Despite the rising costs for consumers, the brokerage does not anticipate any major disruption to the underlying demand scenario.
The demand momentum has remained robust, particularly for cooling products, since the second half of April. While above-normal inventory levels in April initially impacted primary sales, primary and secondary sales growth aligned from May onwards. The industry is currently sitting at very normal inventory levels across product categories.
Volume growth has been strong across the sector. The room air conditioner (AC) industry recorded approximately 20% volume growth in the April-June quarter of 2026 (Q1FY27), while refrigerators saw high single-digit to low double-digit growth. For the second quarter covering July-August-September, volume growth has surged to nearly 35% to 40%, aided by a favourable base from the previous year.
Looking ahead to the second half of 2026-27 (FY27), room AC volumes are expected to maintain a 20% growth rate for the industry as the base continues to remain favourable. However, the key variable to monitor will be how margins shape up in an uncertain environment, particularly given the West Asia crisis exerting significant pressure on input costs.
Within the current market environment, LG Electronics emerged as a preferred bet due to its superior margin delivery. The company delivered relatively far better margin performance during the first quarter and is expected to continue outperforming the broader industry on that front.
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The room AC segment remains the preferred space for Equirus Securities, despite near-term margin uncertainty, because underlying demand remains highly intact. Once the raw material cycle turns favourable, the segment is positioned to deliver strong volume performance alongside margin improvement. Within this space, Blue Star and Voltas are the preferred stock picks.
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