Forget AC Stocks and Focus on These Companies Making Summer Products

Have you ever wondered why some stocks perform better than others during certain seasons of the year? If yes, then you are not alone.

There are many different approaches of investing - value investing, growth investing, contrarian investing, and more.

While most of these investment strategies focus on the long term, some can yield reasonable short-term returns.

The strategy that we are talking about today is the seasonal investing strategy.

Buying and selling stocks according to their past performance at various points during the year is known as seasonal investing.

The idea is that certain sectors or industries tend to outperform others during certain seasons.

In a previous editorial, we discussed which AC stocks are the worth tracking in the current summer season in India.

Let us now have a look at the non-AC stocks which can benefit heavily in this summer.

#1 Varun Beverages

First on the list is Varun Beverages (VBL).

Varun Beverages is one of the largest franchisees of PepsiCo in the world (outside the US). It accounts for more than 90% of PepsiCo's beverage sales volume in India.

The company produces and distributes a wide range of carbonated soft drinks, non-carbonated drinks, and packaged water. These are sold under trademarks owned by PepsiCo.

It has 37 manufacturing facilities in India and 6 abroad. VBL also has a robust supply chain with 110+ owned depots, 2,500+ owned vehicles, 2,400+ primary distributors, and 925,000+ visi-coolers.

The company has consistently experienced its strongest financial performance during the last quarter i.e. Q4 of the financial year, which is the summer season.

Due to the increase in demand in the same period last year, i.e. in Q4 FY23, sales volume grew by 24.7% to 224.1 million (m) cases from 179.7 m cases in Q4 FY22.

The revenue of the company has seen 3-year CAGR growth of 35%, while the profit has increased by a 3-year CAGR of 77%.

The company's current financial performance is good, with a 35% HYPERLINK "https://www.equitymaster.com/glossary/return-on-equity/"Return on Equity (RoE) and 29% Return on Capital Employed (RoCE).

The company has incurred a net capital expenditure (capex) of Rs 21 billion (bn), allocated towards new production facilities and land acquisition for future plant construction.

As of March 2024, VBL has acquired Beverage Company (BevCo) to enhance presence in African market, making it a subsidiary of the company.

The stock price has seen a 5.8% rise in the past month and a significant 108.8% rise in the past year.

#2 Vadilal Industries

Second in the list is the India's second-largest ice cream brand by sales, Vadilal Industries.

The company is engaged in the business of manufacturing ice-cream, frozen dessert, juices, candy, as well as exporting processed food products.

Vadilal has the largest range of ice creams in the country, with more than 150 flavors sold in more than 300 packs and forms. It has a 16% of total organised market share.

The company has a massive 175,000 dealers across the nation. It also has India's fastest cone making machine.

The company has a robust and extensive pan-India distribution network with more than 150,000 dealers and trade partners that cater to every nook and corner of the country.

In terms of the financials, the topline of the company has seen 3-year CAGR growth of 21%, while the profit has increased by a 3-year CAGR of 34%.

The RoE and RoCE of the company for the year stood at 28% and 26%, respectively.

The company is trading at a PE ratio of 22x, which is lower than its most of its peers.

Vadilal Industries' stock price has experienced a 3.7% rise in the past month and a massive 125.5% rise in the past year.

#3 United Breweries

Third in the list is, United Breweries.

United Breweries Limited (UBL) is engaged in the business of manufacture and sale of beer and non-alcoholic beverages.

The company markets its products under the flagship brands Kingfisher and Heineken.

The company operates 32 manufacturing units in India, comprising 21 owned facilities and 11 contracted units.

In terms of the financial performance, the topline grew by 3-year CAGR of 5%, while the profit has decreased by a 3-year CAGR of 9%.

Sales of the company grew by 13%, with an 8% increase in volume, in the third quarter of FY24. To further increase the sales, it has Increased advertising and promotion spend by 2% in the quarter.

The RoE and RoCE of the company for the year stood at 8% and 11%, respectively.

Increased alcohol consumption driven by rising disposable incomes, presents a lucrative opportunity to capitalise for the company.

United Breweries' stock price has seen a 17.7% rise in the past month and a moderate rise of 41.2% in the past year.

#4 Symphony Ltd

Fourth in the list is the largest air cooler manufacturer in the world, Symphony Ltd.

The company is engaged in the manufacturing and trading of residential, commercial, and industrial air coolers in the domestic and international markets.

It addresses every cooling need with a product range comprising household, commercial and industrial air coolers.

The air cooler industry is divided into organised and unorganised markets. The organised market is 30% of total market and out of this, Symphony has 50% market share.

The topline of the company has seen 3-year CAGR growth of 9%, while the profit has increased by a 3-year CAGR of 10%.

The RoE and RoCE of the company for the year stood at 18% and 19%, respectively.

Symphony Ltd' stock price has seen a 14% rise in the past month and a slight decline of 1.5% in the past year.

Conclusion

Seasonal investing can be a valuable tool for investors who are looking to generate additional returns and reduce their risk.

However, it's important to remember that seasonal investing is not a get-rich-quick scheme. It takes time and discipline to generate consistent returns.

Investors must exercise caution and conduct thorough research before investing.

Make sure to consider the factors like market volatility and seasonal fluctuations.

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...