Voltas Ltd. share price target

We value based on SOTP, valuing EMPS/EPS/UCP at Sep-20 P/E at 17/20/35x with TP of Rs 640 (Rs 651 earlier). Voltas reported a mixed bag, with a beat in EMPS segment, market share gains in UCP but a sharp decline in UCP EBIT margins. Net revenues grew by 37% (exp. 10%) driven by robust execution in the project biz (trend prevalent across the capital goods sector). EBITDA/APAT grew by 25/9% (exp. of 12/6%).

6 November 2018 Sales grew 37% YoY to INR14.2b, above our estimate of INR11.9b, led by better EMP sales (INR9.0b v/s our estimate of INR6.8b). EBITDA rose 27% YoY to INR1.1b (in-line), with the margin of 7.6% (-60bp YoY) missing our estimate of 9.2% due to weak UCP margins. PAT rose 8.5% YoY to INR1.0b, ahead of our estimate of INR930m, led by higher other income (INR461m v/s our estimate of INR290m) and a lower tax rate (23.2% v/s our estimate of 28.4%). UCP sales grew 8% YoY to INR4.

Q2 saw margins halve in the UCP even as it grapples with inventory. Strong execution in the projects business saved Q2 for Voltas. Q2 aside, we continue to like the long term AC story in Voltas. Further, there is incremental growth coming from its durables foray. We maintain our Buy...

imported from Thailand with the initial rollout of frost-free models; the company plans to launch smaller-sized direct-cooling models later. launched washing machines in different categories of 7-12kgs across range and 12-year motor warranty v/s 10-year industry norm All front-load, fully-automatic machines come with inverter motors for power which has 15min/30min extra wash cycle and vents on top of the washing machine for better drying during monsoons A+++ rating for fully-automatic washing machinesthese are the top-of-the- line fully-automatic washers and are most energy efficient as per EU standards In our view, size of the washing tub is bigger than competition across Washer-cum-dryer models also being launched in top-end models. around 100 exclusive brand outlets and around 70% of its dealers (~16,000 touch points for Voltas) deal in other product categories and this network would be utilized by the JV.

Voltas is India's largest air conditioning company and one of the world's premier engineering solutions providers and project specialists. It operates its business under three segments, namely i) Unitary Cooling Products, ii) Electro Mechanical Projects and iii) Engineering Products & Services.

14 September 2018 Consumer Durables home appliance portfolio consist of refrigerators, washing machines, dishwashers and microwaves, and these will be sold under the brand Voltas Beko. With this launch, the Voltas-Arcelik JV should address a potential market of INR430b, which is growing at 10-12% annually. The company is looking to corner around 10% market share, and to generate revenues of INR100b by 2025 in the home appliances segment. Key competitors for Voltas Beko are LG, Samsung and Whirlpool (Page-2 onwards market size, market share, competition and pricing across categories). The JV named Voltbek Home Appliances Private Limited (Voltbek) plans refrigerators; b) 40 SKU's in washing machines; c) 12 SKU's in microwaves; and d) 7 SKU's in dishwashers. The products will initially be imported from Arceliks plants in Thailand and Turkey. Production is slated to begin from mid-CY19 onwards and the factory would have a capacity of 1m refrigerators and washing machines, along with 0.

A weak summer coupled with lower volume offtake in Q1FY19 led to ~2% YoY decline in sales growth of unitary cooling product (UCP) YoY in Q1FY19. On the other hand, strong sales growth in EMPS segment (up ~31% YoY) was on the back of a pick-up in execution of domestic and international orders. Despite rising competition, its market share was at 23.5% in Q1FY19 in the RAC segment Saving in other expenses (down ~50 bps YoY) and employee cost (down 90 bps YoY) helped offset lower gross margin. As a result,...

12 August 2018 Sales of INR20.5b (+11% YoY) were above our estimate of INR19.9b. EBITDA rose 17% YoY to INR2.4b (our estimate: INR2.3b), with the margin at 11.3% (+60bp YoY) v/s our estimate of 11.5%. PAT of INR1.8b (flat YoY) was lower than our estimate of INR2.0b on account of lower other income (INR282m v/s our estimate of INR500m). UCP sales declined 2% YoY to INR11.9b due to unseasonal rains across the northern and southern markets. Market share stood at 23.5% (+130bp YoY and +70bp QoQ).

We value based on SOTP, valuing EMPS/EPS/UCP at Jun-20 P/E at 17(15 earlier)/20/35x with TP of Rs 663 (Rs 638 earlier). Voltas reported a strong quarter with 6% primary growth in RAC during an erratic summer. RAC market (secondary level) declined by ~10% while Voltas was flat. Voltas channel inventory is at normal levels (60 days) which gives us better visibility in the upcoming quarter. It was encouraging to note that Voltas gained market share (23.5% share; up 130bps) when MNCs have raised their game (Daikin and LG).

Voltas is a Tata Group company, it has 3 business vertical Unitary Cooling Products,Trunky HVAC services and equipment services business.