Top ten stocks to invest in this summer for cool returns

With the mercury on the rise, financial experts and advisors are suggesting that investors consider purchasing shares of companies associated with air conditioning, cooling systems, consumer durables, and travel, as these sectors typically experience an upswing between March and June. Additionally, there are other sectors poised to benefit from a scorching summer, including manufacturers of talcum powders, ice creams, fruit juices, aerated beverages, and deodorants. This article analyzes ten stocks that are well-positioned to capitalize on the increased demand for these products.

Blue Star

The summer season has commenced favorably for the air conditioning industry, with an anticipated YoY growth of 15% in terms of value. Analysts predict that Blue Star will once again outperform the industry, achieving a remarkable 25% YoY growth and further expanding its market share to 11.5-12%. Renjith Sivaram, an analyst at Antique Stock Broking, values the company at Rs 433 for its standalone business, applying a multiple of 21x FY18 estimated earnings, and at Rs 32 for Blue Star, with a multiple of 10x FY18E earnings.

Hitachi Home & Life

Analysts have high expectations for Hitachi, projecting a healthy growth rate of 15-20% for the quarter. Despite a 30% decline from its 52-week high, the stock is currently trading at 36 times its FY2017 earnings, compared to its five-year average PE of 47. Manoj Gorim, an analyst at Equirus Securities, maintains a “trade” rating on the stock due to anticipated sales growth in 4QFY16 and 1QFY16, although margins may remain under pressure.

Manpasand Beverages

Manpasand operates in the fruit drink segment and is making impressive strides. The company’s Mango Sip reported a YoY revenue growth of 101%, while Fruits Up achieved a revenue growth of 62.3% in the first quarter of the year. Analyst Anand Mour of ICICI Securities values the stock at Rs 687 with a PE of 25 times FY18E EPS, offering a 10% discount compared to consumer companies.

Vadilal Industries

A sweltering summer spells good news for ice cream manufacturers like Vadilal, particularly in the first quarter of FY17, given its diverse brand portfolio. Despite a 49% rally in the past month, Bloomberg consensus estimates suggest an 8% upside potential. Vadilal is second only to Amul in terms of volume in India and has been recognized as the most trusted ice cream brand for two consecutive years.

Lloyd Electric

Lloyd Electric’s stock has surged by 32% in the last month as the company gains market share in the air conditioner category. Analysts anticipate further market share growth, leading to increased revenue and profitability. Manoj Gorim of Equirus Securities expects robust growth of 30-35% in the coming quarters.

Voltas

The sweltering summer conditions could potentially lead to positive surprises for Voltas, sparking a short-term rally in its stock price, which has already risen by 23% in the past month. However, some analysts find it challenging to justify investments in the stock at current valuations.

Pidilite Industries

Pidilite offers a product designed for application on roofs and walls to reduce heat absorption. The stock’s price-to-book value is expected to be 10.9 and 9.5 times for FY16 and FY17 estimated book values, making it an attractive option for short-term investors.

Emami

Emami’s volume growth is seasonally driven, with the first quarter of FY17 benefiting from its summer portfolio, including products like Navratna Cool Oil, Talc, and HE deodorant, which collectively contribute approximately 25% to the annualized portfolio. The stock is currently trading at 36/27 times FY2017/8 estimated adjusted earnings, with a target price of Rs 1,250 according to Sharekhan.

Symphony

With heatwaves primarily affecting central and northern India, Symphony, specializing in coolers rather than air conditioners, stands to gain significantly. Despite trading at a relatively high PE of 45 times its FY17 estimate earnings, analysts believe the stock could provide a 20% return in the next few months, with a potential target of Rs 2,900.

Cox & Kings

Summer months are peak business season for tour and travel companies, coinciding with school holidays, accounting for nearly 60% of the holiday bookings for the entire financial year. Analysts are optimistic about Cox & Kings, not only due to summer-related benefits but also because of its debt restructuring efforts. Joyjit Sinha, an analyst at Karvy Stock Broking, recommends buying the stock with a target price of Rs 202. IIn other news, the Godrej Group is reportedly in advanced negotiations to formally split its diverse businesses. Additionally, economists are expressing concerns about a combination of rising crude oil prices, a stronger dollar, and higher US interest rates, which could pose challenges for emerging markets, including India. JSW Cement is in initial talks to acquire Heidelberg Materials’ cement businesses in India, according to industry sources.

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