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ODDO BHF Asset Management

As needs for energy-efficient sustainable buildings are rising, awareness about poor air quality is increasing, and building automation demand through IoT (Internet of things) and smart homes is growing, HVAC could be an interesting positioning for the future…


Mainly driven by construction sector growth in both residential and non-residential sectors, HVAC equipment refers to heating (heat pumps, furnaces, boilers, etc.), cooling (A.C., chillers, coolers, etc.), and ventilation (air handling units “AHU”, air filters, humidifiers, etc.). The ability to scale-up production while meeting quality standards and on-time execution is critical to benefit from increasing demand since right-sizing and proper installation are key in the efficiency of units.

HVACs are highly sensitive to government stimulus packages for sophisticated installations and are currently determinant in worldwide public policy debates on both energy efficiency and climate change issues. While historically newbuilds contracts experienced a higher penetration, refurbishment went recently through a better dynamic.


Overall, 2023 exercise was challenging for HVAC, mainly due to destocking over the exercise, be it regarding global demand declining by 9%, partly driven by 23% decline in warm air furnace, or through a material contraction of the non-residential sector activity. Standing out heat pumps with 5% growth, a trend that is to continue over 2024.

Market leaders expected destocking to end in Q4 2023 while shipments could actually continue to decline over Q1 2024.

Considering size, the global HVAC market was worth 206.3bn$ in 2023 and is poised to reach 280.1bn$ in 2028, resulting in a 6.3% CAGR over the period, which remains above other industrial sectors.

The outlook for 2024 appears promising with monthly shipment levels gradually recovering as ongoing

inventory wind-down completes, and government incentives strengthens. Early recovery signs in US residential as spending increases (from 4% to 7% 12m rolling comparing December 2023 spendings with November ones) are expected to result into high- single-digit residential growth for 2024.

Heat pumps subsidies are a good proxy to account for current positive European legislative framework and lies between grants and tax deduction subsidy. On grants, Germany chose to grant up to 18k€ to incentivize on Ground Source Heat Pumps (GSHP) installation from 2023 to 2030. Other countries like Sweden opted for tax deduction mechanism: 30% rebate on labor costs of retrofits installations, up to 5k€ a year depending on device type

Brighter expected outlook and favorable regulation coupled with current strong supply chain will create opportunities for OEMs that are able to produce faster while holding both quality and delivery constant.

While global leading players stem from Americas (JOHNSON CONTROLS, CARRIER, TRANE TECHNOLOGIES) and APAC (DAIKIN INDUSTRIES, LG ELECTRONICS), European smaller stocks are to significantly benefit from identified dynamics thanks to unique positionings and best-in-class catalog.


Author LFI

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