Voltas Ltd. share price target

Rising temperatures and promo offers alleviate the pain This summer, we conducted several channel checks surveying over 25 dealers across 15 of the most populous cities in India to track room AC sales during the season. The key takeaways are as follows: a) volumes improved sequentially during May-June'18 (vs. a 1520% YoY decline in Apr) as average temperatures increased in the second half of May and June (Exhibit 1); b) overall volumes were down 10-15% in 1QFY19, but the increasing share of inverter ACs and price hikes of 3-5% are likely to keep sales growth at -5 to 0%'; c) Voltas, Hitachi and Daikin fared better than competition as Samsung and Panasonic suffered, while Blue Star and Lloyd continued to maintain share in their territories; d) aggressive...

Staring at single-digit growth in near term We met the Voltas management for an update on its growth outlook and the key takeaways are as follows: a) While unseasonal rains continued to play havoc, a favourable base and market share gains may help maintain single-digit volume growth. b) The company hiked prices by 2-5% from mid-May'18 to counter rising commodity prices and a depreciating INR (40-45% import content in room ACs). c) Consumer durables products under the Voltbek JV are slated to be launched during the festive season in 2HFY19; these would be imported in CKD form for the first 18 months. d) An increase in the share of rural electrification (RE)...

Unseasonal rainfall hurt 1QFY19 room AC sales Inverter ACs account for 30% of room AC sales We met VOLT's management. Our key takeaways:...

We cut our EPS estimates by ~3-4% in FY19/20 to incorporate weak summer 2018. However, we advise investors to buy on dips and not evaluate the performance of a company based on one season. We value based on SOTP (valuing EMPS/EPS/UCP at Mar-20 P/E at 13/20/35x) to arrive TP of Rs 667 (Rs 710 earlier). Voltas reported a weak 4QFY18 result with EMPS margin expansion as the only positive takeaway. Consolidated net revenue was up by ~9% like-like (exp. was 18%). EBITDA/APAT grew by 14/12%.

A weak summer coupled with pre-buying activity in Q3FY18 (inventory build-up at the dealer's level prior to a change in energy norms) led flattish sales growth of unitary cooling product (UCP) on a YoY basis in Q4FY18. On the other hand, EMPS segment revenue growth of ~5% YoY was on the back of a pick-up in execution of domestic and international orders. Though Voltas continues to be the market leader in the room air conditioner segment, we believe rising competition restricted its market share gain at ~22% in FY18....

pushing the overall sales. The cost of ACs has increased by 10 to 15% in current fiscal due to the implementation of new ISEER (Indian Seasonal Energy Efficiency Ratio) ratings. AC makers have also moved to a common energy efficiency rating, ISEER rating as...

Consolidated revenues witnessed strong 16.5% YoY growth in Q3FY18 despite being a seasonally weak quarter driven by UCP segment which grew by 31.9% YoY. Strong performance of the UCP segment can be attributed to two factors a) pre-buying from dealers in anticipation of price hikes post implementation of new energy efficiency norms from Jan2018 and b) channel restocking post GST. The company continues to maintain its leadership position in Room Air Conditioners with market share of 23.7%. While Electro-mechanical projects and services (EMP) segment grew by 7.2% YoY on strong execution of projects, Engineering Products and Services (EPS) reported 14% YoY decline in revenue impacted by slowdown in textile industry. The order backlog for EMP segment stood at Rs 4,850 cr (1.7x...

Voltas posted 32% YoY growth in a lean quarter for Unitary Cooling (UCP) on (1) restocking of inventory post GST and (2) pre-buying ahead of star-rating changes (secondary channel can continue to sell at old prices).

Voltas (VOLT) Q3FY18 operational performance was in line with our expectations. While the revenue increased by 16% yoy the EBITDAM increased by 109bps yoy to 8.6%. APAT however remained flattish at 1% yoy. The Electro-mechanical Projects & Services (EMPS) reported steady revenue growth of 7% yoy. Revenues in the Unitary Cooling Products (UCP) increased by 32% yoy largely driven by a combination of restocking and pre-buying. The Engineering Products and...

Voltas reported a strong Q3FY18 performance led by unitary cooling product (UCP) segment wherein segment sales grew ~32% YoY led by low base of Q3FY17 and inventory build-up at the dealer's level prior to a change in energy norms. Besides, a pick-up in execution of orders led EMPS segment revenue growth of ~7% YoY. Despite intense competition, Voltas continues to be the market leader in the...