Johnson Controls‐Hitachi Air Conditioning Q2 Results Review


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Johnson Controls‐Hitachi Air Conditioning India Ltd. once again registered poor set of performance with revenue coming significantly below ours and consensus estimates.

Gross margin has contracted sharply by 815 basis points; however, on sequential basis gross margin has remained flat. We feel that this gross margin contraction is on account of intense competition in room air conditoner space where other companies have become super aggressive.

Our channel checks suggest Johnson Controls‐Hitachi’s aggression in the mass premium segment (multiple new stock keeping unit launches) which is 70% of the room AC industry volumes is not yielding results as it is losing market share to players like Lloyd and Blue Star Ltd.

Johnson Controls‐Hitachi has been losing market share as well as margins in this super competitive environment. We feel it would be difficult to gain market share and improve upon the margins at the same time in this hyper competitive room AC market.

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