Heatwave fans demand for aircon stocks
Investors have been piling into air conditioning stocks as global heatwaves and the spread of data centres drive demand for cooling systems.
Shares in global leading heating, ventilation, and air conditioning (HVAC) firms have recorded sharp increases in recent months, with Tokyo-listed Daikin Industries up 23.91 per cent to 24,050.00 yen (£118.50) since the start of April.
New York-listed Lennox International also saw a similar rise of 22.78 per cent during the same period, closing at $570.73 (£432.27).
Mid-cap and smaller-cap companies also benefited this week as the latest heatwave hit Britain, with shares in the UK-based sustainable climate systems manufacturer Genuit Group rising 5.61 per cent to £2.86.
London-listed Titon Holdings, which provides ventilation systems for residential buildings, also experienced a sharp upwards trend of 13.33 per cent with a share price of £0.85.
Beyond the system
Analysts said record breaking temperatures were partly to blame for the drive in demand for HVAC.
Angeline Ong, senior analyst at IG called cooling a “serious business and investment opportunity”, with countries known for high temperatures, including Dubai and Singapore, introducing cooling infrastructure to “help people and businesses keep functioning”.
Boiler manufacturer Worcester Bosch noted an increase in cooling system demand, with sales up 50 per cent just this year.
A number of companies are also likely to benefit from investor interest and warm temperatures, including Carrier Global, Lowe’s, Generac Holdings, Linde and Rentokil Initial.
The AI boom is also contributing to soaring demand for HVAC, as companies look to cool data centres.
Data centres currently use 5.8 per cent of the nation’s energy demand, and this is expected to grow fivefold by 2030, rising to 8.8 per cent.
Kenneth Warnock, senior equity analyst at Raymond James, said investing in HVAC is a “technology-led efficiency story” where smart controls, automation and connected systems reduce energy use and operating costs.
“The winners will be the companies that can combine scale, innovation and sustainability credentials,” he said.
The energy shift
Although increased use of HVAC units would use more energy than previously, particularly during the summer months, the push towards renewable energies can help offset this.
As the Met office predicts more summers with temperatures of more than 40 degrees celsius, experts are calling on the government to adapt Britain’s planning and energy regulations to climate change.
The National Grid announced in May an additional £70bn investment into its energy networks across the UK and US in a bid to become a net-zero energy system.
Ike Ijeh, head of housing, architecture and urban space at Policy Exchange said the recent heatwave has “exposed the lunacy of regulatory restrictions on air conditioning” and how opportunities to increase productivity in the energy market are “being squandered.”
He said: “The state mandates smaller windows in new housing and builds or permits schools and office blocks covered in glass. But it then bans the mechanical solutions to make these buildings habitable in hot weather, before declaring that we have a “climate emergency”.”
Air conditioning installations in the UK are on the whole permitted but may be subject to building regulations, landlord approval or planning restrictions.