AC stocks feel the heat as weak quarter, high inventory, guidance cuts hit sentiment

Shares of air-conditioner and cooling equipment makers slumped sharply on Monday, August 11, hit by a mix of weak summer sales, expensive valuations, and cautious management outlooks.

PG Electroplast was the biggest loser, plunging 18% after it slashed its FY26 guidance.

The company now expects revenue growth of 17-19% for the year, down from its earlier projection of 30.3%. Group revenue growth guidance was cut to 21-23% from 33%, while net profit growth is now seen at just 3-7% compared to 39.2% earlier. Revenue growth for its product business was also revised down to 17-21% from 35%. Management flagged high dealer inventory as a major concern, saying that most contract manufacturers are scaling back production.

Voltas slipped 8% after reporting a 35-40% drop in industry volumes in Q1FY26. Its Q1 results fell short of estimates, with revenue down 20% year-on-year to ₹3,938 crore. EBITDA and net profit each fell 58%, while margins shrank to 4.5% from 8.6%.

Nomura maintained a ‘Neutral’ rating on Voltas with a price target of ₹1,317, citing margin risks from rising competition. It cut its FY26 RAC industry growth forecast to 5% from 10% earlier, while keeping FY27/28 growth estimates at 20% and 15% respectively. Voltas' FY26/27 UCP revenue growth estimates were also lowered to 6% and 24% from 13% and 21%.

Jefferies, however, retained a 'Buy' rating with a price target of ₹1,670, saying that despite weaker volumes and mid-season production cuts, Voltas' market share rose month-on-month, from 16.9% in April to 19.3% in June.

It expects recovery drivers ahead, including an early festive season, the possibility of a second summer, updated BEE ratings, and cost control measures.

Voltas currently trades at 36x FY27e PE, 22% below its five-year average.

CLSA kept a 'Hold' rating but cut its target to ₹1,170, citing Q1 performance below expectations. The company expects demand recovery from Q3 onwards, though full-year industry volumes could still be flat or down up to 10%.

Other stocks also slipped, with Virtuoso Opto down 6%, Amber Enterprises 4%, Blue Star 3%, Symphony and Havells (Lloyd) 2% each, and E-Pack Durable and Johnson Controls losing 1%.

Why the sell-off?

Analysts cited the early monsoon as a key factor reducing peak summer demand, leading to excess dealer inventory. Many EMS-based AC companies were already trading at high valuations, and recent fundraisings at premium prices have added pressure. Slower growth expectations have further soured sentiment.

Valuations check

PG Electroplast and Voltas now trade below their three-year averages, while Blue Star and Amber remain above.

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