Voltas Ltd. share price target

Upcoming festive season key for RAC offtake Voltas (VOLT) reported a weak set of earnings, with revenue/EBITDA miss of 9%/27%. The strong show in the Electromechanical Projects (EMP) segment failed to offset the weakness in the Unitary Cooling Products (UCP) segment. The ordering intake/outlook for the Projects business remained subdued with clients delaying their capex spends. AC sales volumes may fall short of FY20 levels, with no sign of pent-up demand this time around during a lean summer. However, this would still mean some growth in YoY terms. On a positive note,...

We cut our FY22/23 earnings by 6.1%/ 4.7% given 1) disrupted peak season sales due to Covid-19 and 2) commodity inflation led margin pressure. Although VOLT expects festival season led spurt in demand, they remain cautiously optimistic and expect UCP revenues to be below FY20 levels given loss of sales in peak summer months. With unabated commodity inflation impacting margins, VOLT has initiated price hikes of 8-10% in CY21 and is confident of further fortifying its RAC leadership (26.7% market share) while maintaining margins at 11%-13% led by 1) wide distribution reach (22,000...

VOLT's 4QFY21 earnings were 28% better than our expectation, led by better than expected margins in EMP and UCP segment. Voltas continues to be No.1 player in Room Air Conditioners (RAC), with a market share of 25.6%. Favorable product mix aided UCP margin as the share of Inverter ACs now constitutes 77% of Split AC sales (64% in 4QFY20). Current valuations adequately factors in franchise strength of the UCP business. We note that a large part of the margin surprise is due to cut in ad spends and low-cost inventory that was procured last year (~200bp advantage). We...

Beat across major fronts with margin expansion

We continue to like VOLT for the longer term given 1) leadership position in high potential RAC segment 2) balance sheet comfort (Rs11bn net cash) and 3) Restructuring in B2B business to focus on B2C. We estimate 29.8% EPS CAGR over FY21-23. Maintain Hold rating with SOTP based target price of...

Company has delivered decent results across segments and has further bolstered its order book during the quarter. At current juncture, we see limited upside potential post the recent stock rally and therefore we...

Consolidated revenue growth of ~33% YoY was much ahead of our estimates led by 40%, 26% and 46% UCP, electro mechanical project and services (EMPS) and engineering products & services division (EPS), respectively. The strong revenue growth in the EMPS segment was largely driven by execution of international orders amid improved labour availability and access to project sites. Further, in the process of restructuring its business under B2B and B2C categories separately, the board has approved transfer of its domestic project business to its wholly owned subsidiary...

VOLT's 3QFY21 earnings were 31% better than our expectation, led by betterthan-expected execution in the EMP segment, strong volume growth in the UCP segment, with ongoing cost rationalization leading to higher margin. It has retained its numero uno position in Inverter Air Conditioners/Room Air Conditioners (RAC) with a market share of 21.8%/26% in Dec'20. Share of Inverter ACs now constitutes 60% of RAC sales (v/s 49% in 3QFY20). With a rise in commodity prices, the management has undertaken a 5-6% price increase across the UCP segment, with COVID-related cost cuts providing a cushion to margin. We believe the risk to margin exists in this highly...

Voltas (VOLT) reported exceptional performance again in Q3FY21.

VOLT management remained cautiously optimistic on the upcoming summer season sales given commodity cost inflation and resulting price hikes. However, the management remains confident of growing faster than the RAC industry while maintaining margins led by 1) wide distribution reach (c.19,000 touchpoints) 2) strong brand recall 3) supply chain efficiencies and 4) calibrated price increases. VOLT maintained its RAC market leadership with 26% share and is likely to gain from Govt's thrust on atma-nirbhar initiative in Room AC. MEP segment continued to improve sequentially while focusing...