Voltas Ltd. share price target

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

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...