Voltas Ltd. share price target

13 March 2019 Capital Goods AC industry to register double-digit growth in FY20 on back of a pick-up in demand in certain pockets of the country. VOLT expects volumes to increase in March- April (post the festive season of Holi). Inventory levels have started to recede and primary channel filling has increased. The new facility will come up in phases with the INR5b capex spread over the next five years; annual capex will be in the range of INR1b. VOLT expects the factory to start in 2H 2020. margins to settle around 11-12% on sustainable basis, despite its inability to take price hikes given the subdued demand, INR depreciation and increase in competition, raw material cost, and import duty on compressors and completely built units (CBUs). EBIT margins for 9MFY19 for the UCP segment stood at 9.1%. 4Q margins for VOLT over the last five years stood at an average of 16.9%.

We value Voltas based on SOTP, valuing EMPS/EPS/UCP at Dec-20 P/E at 17/20/35x with TP of Rs 650 (Rs 640 earlier). Voltas reported a weak quarter led by muted off-season RAC performance. Net Revenues grew by 9% driven by healthy execution in the project biz (up 16% vs. exp. of 22%). Weak RAC sales (-3% vs. exp. of 5%) was owing to high channel inventory, modest festive season offtake and heavy base (32% in 3QFY18; rating change led pre-buying).

ICICI Securities Ltd | Retail Equity Research Topline growth of ~9% YoY was largely impacted by the UCP division where segment revenue declined ~3% YoY. The tepid performance was led by poor festive demand and failure of second summer. However, the project (EMPS) and product (EPS) segment recorded revenue growth of 16% and 21% YoY, respectively, owing to efficient execution of quality orders UCP segment EBIT margin was down ~450 bps YoY to 8.5% due to...

15 February 2019 Sales grew 9% YoY to INR14.8b, marginally below our estimate of INR15.4b, impacted by lower EMP sales (INR8.7b v/s our estimate of INR9.2b). EBITDA declined 3% YoY to INR1.2b estimate of 8.2% due to weak UCP margins. Adj. PAT declined 8% YoY to INR0.9b, below our estimate of INR1b. VOLT booked a loss of INR308m pertaining to its JV business with BEKO. declined 3% YoY to INR5.2b (in-line). The segmental margin shrank 450bp take price hikes, despite a rise in RM cost and INR depreciation.

positive, however it needs considerable investment to scale up in highly competitive segment. We estimate 9% PAT CAGR over FY18-21. Retain Accumulate with a target price of Rs600 (28x DecFY21 EPS). Poor summer sales on high closing inventory remains a key risk and can de-rate the stock. Concall Takeaways: 1) RAC industry de-grew 4% in 9MFY19 on account of soft Diwali & poor summer season sales. 2) Current RAC inventory is 2 months, expect it to get normalized by end of Q4 3) Inverter ACs account for 40% of spilt AC sales, which are 80% of AC sales 4) 9MFY19 market share at 24% (200bps increase...

Voltas being a strong brand in the room air conditioner (RAC) segment has maintained its market leadership position in India despite rising competition and various macro level abruptions such as demonetization and GST implementation. Voltas' Unitary Cooling Products (UCP) segment contributes ~50% to sales and recorded ~12% CAGR in FY12-18. A strong brand coupled with over 6,500 dealers has helped increase its market share in ACs from 14% in FY10 to ~21% in FY18. Product mix has improved towards energy efficientinverter RAC segment as inverter AC currently...

Voltas being a strong brand in the room air conditioner (RAC) segment has maintained its market leadership position in India despite rising competition and various macro level abruptions such as demonetization and GST implementation. Voltas' Unitary Cooling Products (UCP) segment contributes ~50% to sales and recorded ~12% CAGR in FY12-18. A strong brand coupled with over 6,500 dealers has helped increase its market share in ACs from 14% in FY10 to ~21% in FY18. Product mix has improved towards energy efficientinverter RAC segment as inverter AC currently...

Voltas' 1HFY19 room air-conditioner (AC) sales saw muted growth of 6% as aresult of unseasonal rains and hailstorms across North and South India.Although, 3QFY19 sales witnessed a pick-up in the western region due to a rise in temperature, rest of India saw tepid sales given a seasonally weak quarter(3QFY18 was a very strong quarter for the UCP segment on inventory clearance done by VOLT as new Energy norms came into existence from Jan'18).

Voltas Ltd's Q2FY19 numbers were largely in line with our estimates. Consolidated net revenue growth stood healthy at 37.1% YoY, driven by strong performance from projects business ( 61.7%). Further, unitary cooling products segment reported decent growth of 8.2% after two quarters of muted performance. However, growth in EBITDA was relatively lower at 24.8%, while EBITDA margins contracted 76bps YoY to 7.6%, led by a sharp margin erosion of 616bps in unitary cooling products.

ICICI Securities Ltd | Retail Equity Research Voltas' topline growth of 37% YoY was largely driven by EMPS segment (contributes ~45% of total revenue) wherein segment revenue was up ~62% YoY owing to execution of domestic (led by electrification projects) and international orders. However, the UCP segment (contributes ~50% of total revenue) stayed underperformer with revenue growth of 8% YoY due to bad weather, unseasonal rains and weak Onam sales in Kerala (due to floods)...