Voltas Ltd. share price target

With volume recovery in both UCP and EMP in upcoming quarters, we expect the topline to improve gradually. However, focus remains on the firm's ability to control costs in order to recoup margins. Hence we...

Voltas' (VOLT) 2QFY21 earnings were 37% better than our expectation, largely led by better-than-expected execution in the EMP segment and higher margins in the UCP segment. VOLT has sustained its no.1 position in Room Air conditioners (RAC) and further improved its market share to 26.8% in Aug'20 (YTD 26.4%). Inventory level with the company stood at ~110 days, which is higher than normal, but should normalize by Dec'20-Jan'21. On the recent restructuring of business announcement, management was clear that the exercise is not aimed at selling off/demerger of the projects business....

Voltas Q1FY21 results came broadly ahead of estimates (Revenue/EBIDTA beat: 26.6%/31.2%)

Lockdowns in the past several months have taken away a large portion of peak summer sales and the same would lead to a double industry volume decline in FY21Country-wide lockdown for the first half of the quarter led to a complete washout of sales, and it was only by the 3rd week of May that industry could resume a semblance of activity. Quick and nimble to respond, Voltas managed to grab the opportunity and sold over 3.4 lack units of Unitary cooling products in a window of 45 days, thereby maintaining its leadership with 26.9% market share as on June as per third party research....

Voltas lost almost 40 days of sales due to lockdown and reported ~51% YoY fall in revenue in Q1FY21. Revenues from UCP, electro-mechanical projects (EMPS) and engineering & product services declined ~60%, 37% and ~36%, respectively. The drag on EMPS business was largely on account of slow execution of international and domestic orders amid strict government regulations. Despite a strong order book of | 7663 crore, the lockdown situation may impact the pace of execution, job closures, thereby resulting...

We increase our FY21, FY22 & FY23 earnings by 10.6%, 7.5% and 10.3% given 1) sustained market share gains in Room AC 2) encouraging response to Voltas-Beko portfolio in first season and 3) Sufficient forward visibility in MEP with strong order book (Rs77bn) led by domestic operations Even with lockdown disrupting peak summer season sales, VOLT continued to outperform the industry by reporting a 45% decline in RAC volumes vs 49% of industry on the back of 1) wide distribution reach (19,000 touchpoints) 2) heat-wave in the month of May and 3) strong brand recall. In MEP, although...

Voltas gained further market share in the RAC (Room Air Conditioner) business and emerged as market leader in the Inverter category as well. It has also maintained a leadership position in Inverter ACs. Company-level inventory stood at 140 days, while that in the channel stood at 4045 days. The response for DC refrigerators has been encouraging, with the company accelerating its production post Unlock 1.0 owing to higher We expect system-level inventory to normalize by NovDec20; hence, FY22E should turn out to be a normal year. With a strong distribution network, coupled with less reliance on imports, we expect VOLT to continue its leadership position in the form a JV with the Beko brand to cater to a wider audience in the Consumer Durables space (beyond ACs) has come at the right time.

Voltas is a leading air conditioning and engineering services...

We have trimmed down FY21-22 revenue estimates by 13.7%/12.5% on account of COVID-19 related challenges. Amidst uncertainty, we remain cautious and maintain our REDUCE rating on the stock with a revised target price of Rs. 528 based on 30x FY22E adj. EPS Weak EMP operations offset growth in UCP revenues Voltas registered a revenue growth of 1.3% YoY in Q4FY20 to reach Rs. 2,079cr. This growth was mainly attributable to growing revenue from UCP (+20.1% YoY to Rs. 1,199cr), on account of severe summer prediction and expected supply chain...

Strong margin of UCP segment drives bottomline While the EMPS segment margin was down ~311 bps YoY at 1.4%, the UCP profitability surged 423 bps YoY to 14.6% in Q4FY20. While the management refrained from giving any future margin guidance, we believe FY21E margin is likely to get impacted by lower operating leverage. However, we also believe ~| 800 crore of liquid asset on the book would...