This Summer Season, Don't Buy Power Stocks. Instead Look at These 5 Companies...

As the summer season approaches, the heat is on - quite literally! India is bracing itself for a heatwave, with temperatures predicted to soar to 40 degrees Celsius in some parts of the country by the end of March 2023.

To put things in perspective, reports state that February 2023 was the hottest month in the last 122 years.

With rising temperatures comes an increase in power demand. Naturally, this trend benefits power companies. Biggies like Tata Power, JSW Energy, NTPC, and CESC. But there are a whole lot of other big beneficiaries of this heatwave.

In today's article, let's look at the lesser-known opportunities that are poised to benefit from the scorching temperatures and surging demand.

#1 Aditya Vision

First on this list is Aditya Vision, a smallcap company from the specialty retail segment.

Incorporated in 1999, Bihar based Aditya Vision is engaged in retailing of consumer durables. It operates through multi-brand retail showrooms named Aditya Vision.

The company raised around Rs 58 million through its initial public offering (IPO) back in 2016.

The reason why we believe this company could turn out to be a dark horse in the summer season is because of its offline reach. In 2022, the company ventured into Jharkhand. It has over 90 stores across Bihar and parts of Jharkhand.

The company is also venturing into more areas including in Chhattisgarh and Bengal. It aims to open around 150 stores by 2025.

Total no. of stores

Imagine a Croma showroom, but in Bihar or Jharkhand. The consumer electronics market is still under-penetrated in Tier 3 and Tier 4 cities.

With its extensive offline reach, Aditya Vision has tapped into the huge potential of these untapped markets and is making a mark in the retail sector.

Ideally, the first quarter and the last quarter is good for Aditya Vision as there's wedding rush and pre summer sales for cooling products.

The company's shares have already seen some run up ahead of the summer season. Meanwhile, shares have seen a meteoric rise on the bourses since listing.

The company's sales have already surpassed last year's figure with one more quarter still left. Meanwhile its profit after tax for 2023 has already double from last year's profit.

Aditya Vision Financial Snapshot (2018-2022)

Rs m, standalone	2018	2019	2020	2021	2022	TTM
Revenues	4,439	5,637	7,970	7,480	8,991	10,160
Growth (%)	23%	27%	41%	-6%	20%	13%
Operating Profit	77	174	343	572	845	991
OPM (%)	2%	3%	4%	8%	9%	10%
Net Profit	28	58	140	204	353	576
NPM (%)	1%	1%	2%	3%	4%	6%
Debt to Equity (x)	2.4	1.1	0.9	1.7	1.5	-

Data Source: Ace Equity
TTM numbers only include the first three quarter's results

Promoters of the company have offloaded their shares in the past two quarters, bring promoter holding down to 68% from 74%.

To know more, check out Aditya Vision's financial factsheet and its latest quarterly results.

#2 Symphony

Next on our list is Symphony.

Established in 1988, Symphony is engaged in the manufacturing and trading of residential, commercial, and industrial air coolers in the domestic and international markets. It is the largest air cooler manufacturer in the world.

Over the years, Symphony has built its moat by focusing on product innovation and distribution for cooling solutions that people purchase while graduating from a fan.

During the pandemic, lockdowns rendered a drastic impact on companies involved in the air conditioner and air cooler business.

Unorganised players were severely impacted as even the summer season sales in 2020 were down in the dumps.

So a consolidation within the sector was on the cards...similar to how big real estate players made their mark post the pandemic. Symphony, being the largest player, was touted as a clear winner of the inevitable consolidation in the sector.

As the economic recovery took place, Symphony came out stronger from the crisis. The company recently declared impressive December quarter numbers with highest-ever sales both on a consolidated and standalone basis.

Symphony's Quarterly performance

Quarter Ending	Sep-21	Dec-21	Mar-22	Jun-22	Sep-22	Dec-22
Net Sales	1,400	1,460	2,510	2,080	2,150	2,230
Net Profit	320	290	430	250	450	520

Data Source: Ace Equity

The reason why we believe Symphony could be a big beneficiary is because of its presence in Tier 2 cities. In tier 2 cities, many can't afford AC so they prefer air coolers.

Symphony is already seeing a boost in sales due to strong demand traction.

Symphony's consistency in its new product launches is testimony of the company's commitment towards innovation. The company recently launched a Hi-Tech BLDC Air Cooler with breakthrough technology that saves up to 50% power.

It outsources 100% of its domestic production through tie ups with 10 original equipment manufacturers (OEMs). This reduces the risk of reliance on a single source.

Coming to latest developments, the company has decided to buyback shares at Rs 2,000 per share up to 10,00,000 equity shares for an aggregate amount up to Rs 2 bn.

The buyback price is substantially higher than the current market price.

In recent months, shares of Symphony have seen a sharp run up, which could be in anticipation of the upcoming summer season.

The penetration of white goods, like air conditioners and air coolers, in India is very low. This could be another compelling reason which could work out in the long term for Symphony.

#3 PG Electroplast

Third on this list is PG Electroplast.

The company is one of the leading players in electronics manufacturing services (EMS) segment. It supplies to leading brands such as LG Electronics, Whirlpool, Voltas, Sansui, Godrej, and Orient Electric.

The company supplies to all the leading players in the washing machine, refrigeration, and air conditioning market.

The reason why PG Electroplast needs a mention is because its room AC business has seen strong demand constantly, in recent months.

The company's product business crossed Rs 7.2 billion (bn) in the first nine months of 2023 with room AC business contributing Rs 5 bn, recording a massive 431% YoY growth.

On the capex front, PG Electroplast has already doubled its washing machine and air-cooler capacity. It further expanded room AC capacity with 200,000 indoor units per month and 100,000 outdoor units per month.

Till March 2023, the company has a strong order book for AC business with almost 90% capacity utilisation.

Apart from the above reason, the company has delivered robust financials over the years.

PG Electroplast Financial Snapshot (2018-2022)

Rs m, standalone	2018	2019	2020	2021	2022	TTM
Revenues	3,994	5,084	6,394	7,032	10,219	10,243
Growth (%)	9%	27%	26%	10%	45%	0.20%
Operating Profit	299	339	424	524	822	772
OPM (%)	7%	7%	7%	7%	8%	8%
Net Profit	75	99	26	116	330	355
NPM (%)	2%	2%	0%	2%	3%	3%
Debt to Equity (x)	1	0.8	1.1	1	0.9	-

Data Source: Ace Equity
TTM numbers only include the first three quarter's results

The company's December 2022 quarter was robust where net sales saw a growth of 75% while net profit rose 148% on a YoY basis.

In its concall, the company mentioned that due to successful scale-ups across all business segments, it has increased sales guidance to at least Rs 20 bn. If the company achieves this, it will result in a growth of 82% compared to previous year.

The only big concern is the company's debt which has increased over the years. It also took a capex for this year, which upped its debt to equity ratio. According to reports, the company is planning to raise funds via a QIP.

Shares of the company have gained over 400% in the past five years.

#4 Amber Enterprises

Next on this list is Amber Enterprises, an obvious beneficiary from the list of consumer electric companies.

The company dominates the original equipment manufacturer (OEM), original design manufacturer (ODM) market for room air conditioners in India.

It's the largest contract manufacture of ACs in India and the largest supplier of roof mounted package unit air conditioners for the Indian Railways.

Amber generates nearly 70% of revenues from RAC and RAC component businesses.

Given its established presence in the domestic room AC market, the company could emerge as a big beneficiary in the upcoming summer season. More so now because shares of the company have seen a sharp fall owing to weak quarterly results.

Amber Enterprises reported a net loss of Rs 29.8 million (m) for the September 2022 quarter as against net profit of Rs 74.3 m in the year ago quarter as finance costs increased.

In its latest concall, the company said its RAC and components division business has scaled up capabilities and grew by 109% in December 2022 quarter.

The company's chairman Jasbir Singh recently highlighted that almost all the brands have increased their orders and the company will increase production from the current 60% capacity level to 75% by March 2023.

In the past five years, the company has doubled its sales and net profit.

Amber Enterprises Financial Snapshot (2018-2022)

Rs m, consolidated	2018	2019	2020	2021	2022	TTM
Revenues	21,281	27,520	39,628	30,305	42,064	39,245
Growth (%)	29%	29%	44%	-24%	39%	-6.70%
Operating Profit	1,926	2,232	3,182	2,543	3,100	2,484
OPM (%)	9%	8%	8%	8%	7%	6%
Net Profit	623	937	1,584	816	1,092	532
NPM (%)	3%	3%	4%	3%	3%	1%
Debt to Equity (x)	0.1	0.3	0.3	0.3	0.6	-

Data Source: Ace Equity
TTM numbers only include the first three quarter's results

#5 Dixon Technologies

Last on our list is Dixon Technologies, another contract manufacturer like Amber Enterprises.

It's one of the largest design-focused and solutions company in India. Dixon is engaged in manufacturing consumer electronics.

In the latest earnings call, the company informed that a new facility under the PLI scheme has been set up for making inverted controller boards for ACs.

Dixon makes inverter controller boards as part of the 40-60 joint venture with Japan's Rexxam. The JV company is a beneficiary under the PLI scheme, and Dixon will invest Rs 510 million.

Typically, the January to June period is good for Dixon as summer season leads to higher sales. In 2022, Dixon had reported a 40% growth in sales and 43% growth in profit for the March 2022 quarter.

The company has already surpassed last year's sales and profit figures with a quarter to go.

Dixon Financial Snapshot (2018-2022)

Rs m, consolidated	2018	2019	2020	2021	2022	TTM
Revenues	28,416	29,844	44,001	64,482	1,06,971	1,20,790
Growth (%)	16%	5%	47%	47%	66%	12.90%
Operating Profit	1,169	1,418	2,327	2,935	3,881	4,740
OPM (%)	4%	5%	5%	5%	4%	4%
Net Profit	609	634	1,205	1,598	1,902	2380
NPM (%)	2%	2%	3%	2%	2%	2%
Debt to Equity (x)	0.1	0.4	0.2	0.2	0.5	-

Data Source: Ace Equity
TTM numbers only include the first three quarter's results

In 2023 so far, shares of Dixon have put out a negative performance. Dixon Technologies share price has been falling for month now owing to weak demand, among other reasons.

However, the company is expecting recovery in sales led by a ramp-up in production-linked incentives (PLI) with good growth in new segments of refrigerators, wearables, IT, and many more.

Further, Dixon Technologies is also building a team for research and development and is also looking to get into new products.

It remains to be seen whether the upcoming summer season could change the fortunes of Dixon.

Happy Investing.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...