AIR CONDITIONER INDUSTRY

Transcription

1 AIR CONDITIONER INDUSTRY

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3 TYPES OF AIR CONDITIONER The Indian air conditioning market is divided into two major segments I. Room Air Conditioners (RAC)

4 II. Commercial Air Conditioners (CAC)

5 CAC 14% Global Air Conditioner Market Window 15% Global RAC market RAC 86% Split 85%

6 AIR CONDITIONER INDUSTRY OVERVIEW The air-conditioner industry has witnessed several headwinds during FY18, led by GST transition and the change in energy efficiency ratings. Additionally, the summer of 2018 started on a weak note. Window ACs, which accounted for about 80% of the total sales a decade back, have gradually slide to 20% and are holding on to this share for the last couple of years. This implies AC demand was softer during FY18 led by weak summer in 1QFY18 and the rating change disruption in 4QFY18. 4QFY18-5% 12% 7%

7 ENERGY LABELLING Rating norms were revised from Jan-18, wherein the prevalent 5/3 star norms were downgraded to 3/1 star. This resulted in pre-buying during 3QFY18, as prices would rise at the consumer level in This has impacted Jan- 18 consumer offtake.

8 RATING WISE SALES

9 AIR CONDITIONER INDUSTRY OVERVIEW As per Bureau of Energy Efficiency (BEE), the Air conditioner industry grew at a modest pace of 7% in volume terms during FY18 to 6.9mn units vs. 37% growth in FY17. industry grew by 15% & 11% in value terms in 4QFY18 & FY18 respectively.

10 120.00% RAC Market Penetration % % 91.00% 80.00% 60.00% 54.00% 40.00% 30.00% 30.00% 20.00% 0.00% 7.00% Global China Japan Malaysia Thailand India

11 Market Penetration of Consumer Durables, India vs. Global (%) % 90.00% 85.00% 89.00% 80.00% 70.00% 60.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 7.00% 30.00% 20.00% 10.00% 25.00% 17.00% 0.00% Room AC Refrigerator WM FPD TV Air Cooler India Global

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13 Source: Amber Enterprise RHP

14 MAJOR INDUSTRY PLAYERS Premium Popular Economy

15 NORMAL AIR CONDITIONER VS INVERTER AIR CONDITIONER

16 HOW INVERTER AC WORK?

17 Interestingly, Inverter ACs continued to gain share at a handsome pace (now 28% volume share vs. 11% in FY17). Blue Star believes inverter share in the industry will rise to 50% in FY20. LG has 53% market share In Inverter ACs. Three key factors driving the shift to inverter ACs: The narrowing price gap between fixed and inverter ACs free installation (INR1,500/unit) and comprehensive 3-5 year warranty on inverter ACs Rising electricity prices, which may persuade consumers to look for energyefficient inverter ACs.

18 POWER CONSUMING DATA * - If it is running continuously 3 Times than Air Coolers 5 Times than Air Coolers *3 Star rating IAC 20% *5 Star rating IAC 35%

19 INDIAN RAC MARKET DRIVERS Affluent middle class and changing lifestyle Energy efficient air conditioner Adequacy of power Low Market penetration Increase in average temperature Finance on Consumer Durable make it more easy

20 INDIAN RAC MARKET CHALLENGES Increasing regulation on green house gas emission High imports of components Changing trend of BEE Regulation Cost of energy efficient RAC

21 PORTER S FIVE FORCE ANALYSIS- RAC MARKET Threat of new entrants (Low) Bargaining power of Customers (Medium) Porter s Five Force Substitute Products (Medium) Bargaining power of Suppliers (Medium) Competitive Rivalry (High)

22 MARKET SEGMENTATION OF RAC BY TYPE OF DEMAND Replacement Demand 30% New Demand 70%

23 AFTER SALE SERVICES MARKET IN RAC Source: Amber Enterprise RHP

24 SOME NORMAL FACTS* 60 % 65% come with fixed mind set 40 % 35% are price and dealer driven Customers flow in March to June Price based prefer E- commerce platform Service based prefer dealer market Purely volume based business * BASED ON SCUTTLEBUTT

25 Rs. 36,580 HOW DEALER EARN 1.18 Rs. 31, Rs. 26,271 Rs % 5% Rs

26 JOHNSON CONTROLS HITACHI AIR CONDITIONING INDIA LTD.

27 Hitachi Appliances 40% OVERVIEW OF JCH-IN Johnson Controls 60% Incepted as a joint-venture between two companies, the USbased Johnson Controls and Japan-based Hitachi Appliances, Johnson Controls-Hitachi Air Conditioning India Limited (JCH-IN) is one of the top three players in the Indian air conditioning market today. Hitachi Appliances carved out and contributed its air conditioning business to the Joint Venture. Headquartered in Ahmedabad, Gujarat The Company s manufacturing facility not only boasts of manufacturing a wide range of cooling products from residential to commercial cooling solutions, but is also one of the largest single roof manufacturing facilities in India spread across an area of +1,82,000 sq. m. Company added pick and place robots in the injection molding machines and CNC pipe bending machines.

28 COMPANY S OFFERINGS

29 24.5% YoY Growth RAC Business 9698 Selling Point 1358 Cities and town 18% YoY Growth 500 Distributors in PAC Segment CAC Business 140 Cities and town 200 Distributors in VRF Segment 8% YoY Growth The Company aims to become the number one HVAC Company in India by 2021 along with the enhancement of its market share in both B2C and B2B.

30 32% YoY Degrowth Application-Based Air Conditioners Exports 24% YoY Degrowth Sri Lanka, Indonesia, Bangladesh, UAE, Middle-East and Nepal. Home Appliances 24% YoY Growth Refrigerators Air Purifiers 19% YoY Degrowth

31 MANAGEMENT Mr. Gurmeet Singh Chairman & Managing Director Mr. Franz Cerwinka CEO Mr. Nobuyuki Tao CFO

32 SHARE HOLDING PATTERN FII/FPI/FDI 2% Others 10% MF/DII/Banks 14% Promoters 74%

33 THREATS Application-based air conditioner not doing well can be a concern going forward

34 Sales CAGR 18.63% % % % 40.00% % % % 18.80% 25.00% 20.00% 15.00% % 10.00% % Sales YoY 5.00% 0.00%

35 COMPONENTS OF SALES % % 23.18% 24.86% 22.98% 24.68% 24.07% 19.58% 80.00% 60.00% 6.89% 7.44% 7.23% 6.69% 6.21% 6.45% 40.00% 64.93% 63.37% 61.01% 61.24% 61.24% 64.87% 20.00% 0.00% 5.00% 4.33% 8.78% 7.40% 8.48% 9.10% Gross Profit Material Cost (% of Sales) Employee Cost Other Expenses

36 EBITDA EBIT CAGR 33.82% CAGR 40.62% % 4.85% % % % 9.44% % 9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% % 2.12% % % % % % 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% % % EBITDA EBITDA Margin EBIT EBIT Margin

37 PAT CAGR 45.53% % % % % 5.00% 4.00% % % % 2.00% % % % Net profit Net Profit Margin

38 FCF ROCE - ROE - ROA % 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 24.71% 24.86% 19.11% 18.96% 16.02% 18.47% 18.71% 13.97% 7.09% 6.20% 6.49% 7.36% 7.97% 3.37% 7.21% 4.51% 1.85% 1.06% ROCE ROA ROE

39 Debt/ Equity Working Capital Days Debtors days Creditors days Inventory days

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41 OVERVIEW OF VOLTAS Voltas Limited was established in 1954, with a focus on delivering smart, best-in-class business solutions. Voltas is amongst the top 10 companies within the Tata Group. Voltas Limited offers engineering solutions for a wide spectrum of industries in areas such as heating, ventilation and air conditioning, refrigeration, electro-mechanical projects, textile machinery, mining and construction equipment, water management & treatment, cold chain solutions, building management systems, and indoor air quality. Service & EP-S 5% EMP 45% SEGMENTAL REVENUE UCP 50%

42 BUSINESS VERTICALS OF VOLTAS

43 Network 3 Manufacturing facilities 15,000 Touch Point 100 Brand Store 25 Warehouse 800 Service Station

44 UNITARY PRODUCTS BUSINESS GROUP (UPBG) ROOM AC No. 1 in the industry with Market Share of more THAN 22%. Voltas continues to have the largest distribution reach with more than 15,000 touch points across India. CRP Continued market leadership. Enhanced portfolio with new range of products such as top glass freezers and curved glass freezers. AIR COOLERS Sold more than 200,00 coolers. No. 3 Player in the Industry.

45 ELECTRO-MECHANICAL PROJECTS DOMESTIC PROJECTS GROUP (DPG) INTERNATIONAL OPERATIONS BUSINESS GROUP (IOBG) While keeping HVAC (Heating, Ventilation and Air Conditioning) at its core, DPG has strategically focused on Govt./Govt. funded projects. The Internet of Things (IoT) controlled remote monitoring system for predictive maintenance now has over 1000 chillers connected across India. electro-mechanical solutions and services for several prestigious and complex projects, in more than 35 countries in a span of over 4 decades. IOBG is today the preferred, tier-1 MEP service provider in Middle Eastern countries like UAE, Oman, Bahrain, etc.

46 ENGINEERING PRODUCTS & SERVICES WATER MANAGEMENT & TREATMENT In 1977 a collaboration was formed for wastewater and sewage treatment know-how with Ames Crosta Babcock (ACB) of UK, wellknown leaders in the field for decades.

47 VOLTBEK HOME APPLIANCES PRIVATE LIMITED

48 MANAGEMENT

49 SHARE HOLDING PATTERN Others 22% Promoters 30% FII/FPI/FDI 16% MF/DII/Banks 32%

50 THREATS Any political instability in GCC countries could hurt its international electro mechanical project business, as Voltas get huge chunk of orders from GCC countries. EMPS business is high capital employed business.

51 Sales CAGR 2.98% % % 12.00% 10.00% % % 6.16% 6.00% 4.00% 2.00% % -1.58% % -2.00% -4.00% -6.00% Sales YoY

52 COMPONENTS OF SALES % % 80.00% 8.79% 10.47% 11.30% 10.66% 9.94% 9.17% 11.44% 11.29% 11.38% 11.44% 10.25% 9.16% 60.00% 40.00% 75.34% 73.19% 69.41% 70.44% 70.21% 71.32% 20.00% 0.00% 4.43% 5.04% 7.91% 7.46% 9.60% 10.35% Gross Profit Material Cost (% of Sales) Employee Cost Other Expenses

53 EBITDA EBIT CAGR 20.07% CAGR 21.45% % 10.01% 9.47% % % 12.00% 10.00% % 8.99% 12.51% 12.69% % 12.00% 10.00% % % % 6.00% 4.00% 2.00% % % % 6.00% 4.00% 2.00% % % EBITDA EBITDA Margin EBIT EBIT Margin

54 PAT CAGR 22.62% % 6.69% 8.80% 8.96% % 9.00% 8.00% 7.00% % 4.67% % 5.00% 4.00% % 2.00% 1.00% % Net profit Net Profit Margin

55 FCF ROCE - ROE - ROA % 18.00% 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 13.73% 12.74% 13.51% 13.16% 18.37% 16.93% 7.90% 16.37% 15.11% 7.00% 16.36% 14.90% 16.05% 14.70% 8.19% 7.85% % 2.00% 4.53% 5.18% % ROCE ROA ROE

56 Debt/ Equity Working Capital Days Debtors days Creditors days Inventory days

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58 OVERVIEW OF BLUE STAR Blue Star is India's leading air conditioning and commercial refrigeration company. Blue Star has also forayed into the residential water purifiers business as well as the air purifiers and air coolers businesses. Unitary Products 46% PEIS 4% EMP & PACS 50% Blue Star's other businesses include marketing and maintenance of imported professional electronics and industrial products and systems, which is handled by a wholly owned subsidiary of the Company called Blue Star Engineering & Electronics Ltd.

59 ELECTRO-MECHANICAL PROJECTS AND PACKAGED AIR CONDITIONING SYSTEMS (EMP & PACS) This business segment covers the design, manufacturing, installation, commissioning and maintenance of central air conditioning plants, packaged/ducted systems and variable refrigerant flow (VRF) systems, as well as contracting services in electrification, plumbing and fire-fighting. After-sales services such as revamp, retrofit and upgrades also form part of this segment. Blue Star is the largest after-sales AC&R service provider in India, maintaining around 2 million TR of equipment. UNITARY PRODUCTS Blue Star offers a wide variety of stylish, contemporary and energy-efficient room air conditioners for both residential as well as commercial applications; manufactures and markets a comprehensive range of commercial refrigeration products and cold chain equipment; water purifiers; air purifiers; and air coolers.

60 PROFESSIONAL ELECTRONICS AND INDUSTRIAL SYSTEMS For over six decades, Blue Star has been the exclusive distributor in India for many internationally renowned manufacturers of hi-tech professional electronic equipment and services, as well as industrial products and systems. PROJECTS BUILDINGS It is estimated that almost a third of all corporate and commercial buildings in India are air conditioned by Blue Star. MECHANICAL, ELECTRICAL AND PLUMBING (MEP) INDUSTRIAL INFRASTRUCTURE Design, engineering, fabrication, testing & commissioning and performance guarantee test, on a turnkey basis. Blue Star enjoys a preferred partner status in the infrastructure segment, with unparalleled hands on experience in airports, metro rail projects, power plants and power transmission & distribution.

61 Network 5 Manufacturing facilities 2900 Channel Partner 5000 Store 800 towns 765 Service Station

62 MANAGEMENT Suneel M Advani, Chairman Vir S Advani, Managing Director B Thiagarajan, Joint Managing Director

63 SHARE HOLDING PATTERN Others 31% Promoters 39% FII/FPI/FD I 9% MF/DII/Banks 21%

64 Sales CAGR 10.15% % % % % 20.00% 15.00% 10.00% % % 0.00% % Sales YoY

65 COMPONENTS OF SALES % % 80.00% 14.36% 15.73% 16.75% 15.92% 16.27% 17.28% 7.86% 8.49% 8.41% 9.18% 7.73% 8.39% 60.00% 40.00% 74.68% 72.16% 69.59% 69.16% 70.94% 68.50% 20.00% 0.00% 3.09% 3.61% 5.26% 5.73% 5.07% 5.83% Gross Profit Material Cost (% of Sales) Employee Cost Other Expenses

66 EBITDA EBIT CAGR 18.25% CAGR 19.67% % % 5.52% % % % % 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% % % 4.17% % 4.48% % 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% % % EBITDA EBITDA Margin EBIT EBIT Margin

67 PAT CAGR 22.62% % 3.50% % 2.54% % 2.88% 2.78% % 2.50% 2.00% 1.50% % 0.50% % Net profit Net Profit Margin

68 FCF ROCE - ROE - ROA % 30.00% 26.45% 30.26% % 20.00% 21.88% 20.09% 19.43% 19.49% % 10.00% 5.00% 0.00% 18.22% 16.37% 15.46% 16.11% 9.52% 11.10% 1.77% 3.19% 2.32% 4.19% 4.60% 4.76% ROCE ROA ROE

69 Debt/ Equity Working Capital Days Debtors days Creditors days Inventory days

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71 Havells India, India s leading makers of branded electrical products, has acquired the consumer durable business (CDB) of the Lloyd Electric and Engineering for an enterprise value of Rs 1,600 crore. Lloyd is the is third largest player in the room AC segment after Voltas and LG. As Havells, shows Lloyd electrical as Lloyd consumer segment and this segment consists of Air conditioner, television, washing machine and domestic appliances. Lloyd consumer segment generates EBIT of 18.97%. Electricals consumer durables 19% Lloyd Consumers 17% Lighting and fixtures 14% Switchgears 17% Cables 33%

72 PEER ANALYSIS Particulars Price M. Cap. P/E P/B ROE ROCE D/E EV/EBITDA MC/Sales JCH-IN % 18.96% Voltas , % 14.90% Blue Star % 19.49%

73 Particulars Sales 5Y-CAGR EBITDA 5Y-CAGR PAT 5Y-CAGR EBITDA Margin PAT Margin RM% JCH-IN 18.63% 33.82% 45.53% 9.44% 4.58% 64.87% Voltas 2.98% 20.07% 22.62% 13.07% 8.96% 71.32% Blue Star 10.15% 18.25% 22.62% 6.19% 3.19% 68.50% 25.00% 20.00% 15.00% 10.00% 5.00% 22.00% Market Share 11.00% 11.50% 20.00% 0.00% Voltas Johnson Controls Hitachi Blue Star LG

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