Voltas Ltd. share price target

Q1 a mixed bag with UCP performing well (+ 16% YoY) while losses continued in the EMP segment

Q1FY24 growth likely to fall short of expectations as unseasonal showers dampened summer demand

FY23 saw competition denting margins in VOLT's AC business and provisioning losses in the projects business

UCP EBIT margin returns to double digits in Q4 after languishing at 7-8% over the first three quarters

The competitive intensity in air conditioners has increased considerably over past two years. It has resulted in loss of market share as well as margins for incumbents. Voltas reported consolidated EBITDA margin of 6% in FY23, lowest in past nine years and its market share has declined to 21.9% in Feb’23 (YTD) vs 25.2% in FY21.

With steep increase in competitive intensity, Voltas has decided to protect market shares even it costs it margins in short term. We consider this strategy as DCF accretive. We model Voltas to focus more on differentiated launches, distribution expansion and steady rollout of exclusive brand outlets.

UCP revenue up 11% YoY but EBIT margin band seems to have softened to 7-9% from 12-14% earlier