Voltas Ltd. share price target

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Improvement in margins led by healthy execution, while missed profitability

We cut our FY22 earnings by 14.8% given 1) input cost inflation led margin pressure 2) slow order inflow in MEP segment & 3) increase in JV loss. We, however, expect margins to make a swift recovery in FY23/24 led by 1) likely normal summer season sales (after 2 years) 2) Govt initiatives promoting local manufacturing to help create component ecosystem thereby aiding industry growth & profitability 3) improving mix, calibrated price increase &...

PBIT for the UCP segment fell 300bp on account of elevated commodity cost and inflated prices of input materials. As VOLT had the advantage of low cost inventory as well as strong operating leverage due to volume growth, the margin contraction indicates higher competitive intensity in the AC segment. The management raised prices by 3-5% in Oct'21, but needs to take further hikes to offset margin pressures. However, it will wait for the demand to recover to raise prices further. Owing to its lagging 3QFY22 performance, we cut our FY22E/FY23E/FY24E...

In-line performance with sustained margins

Margin pressure to persist as price hikes inadequate VOLT's 2QFY22 revenue stood in line with our estimates, with strong performance by the UCP segment, offsetting the weak performance in the EMPS segment. Adjusted PAT came in 23% ahead of our estimate. Despite a 24% volume growth in the UCP segment (RAC: +19% YoY), it witnessed a 130bp decline in PBIT margin. As VOLT had the advantage of low cost inventory as well as strong operating leverage due to volume growth, the margin contraction indicates higher competitive intensity in the AC segment....

We expect raw-material inflation could impact the profitability in the near-term. Company has delivered decent results across segments, however the expected third wave of COVID could impact the company's performance in near-term. Hence, we maintain our HOLD rating on the...

On a long term basis, we believe, rising income and aspirations of middle class household in India will be a key demand driver for cooling products. AC's penetration at 7% is lowest among white goods segment Higher demand of energy efficient products...

Beat on est.; healthy performance to continue