Voltas Ltd. share price target

Below-expected quarter but strong portfolio and distribution coupled with low market penetration remain key structural drivers

We see growth potential in the business in the coming months, however input cost inflation may disrupt the profitability in the short-term. Hence, we maintain our HOLD rating on the stock with a rolled forward target price of Rs. 1,290 based on 41x FY24E adj. EPS. Topline impacted due to evolving virus dynamics Consolidated revenue for the quarter Q3FY22 declined 10.1% YoY to Rs. 1,772cr, but grew 6.2% sequentially. Year-on-year the revenue declined due to sharp decrease in Electro-Mechanical Projects and Services (EMP) partially offset by growth in revenue...

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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