Voltas Ltd. share price target

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....

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...

VOLT gave a cautiously optimistic outlook given 1) outperformance in the UCP segment (50% growth vs 30% of industry in 11MFY20) and 50bps market share gain across RAC segments 2) encouraging response to VOLTBEK portfolio with 2% market share in key segments and 3) improved order book in MEP led by domestic operations. Although the industry is witnessing reasonable demand post lifting of lockdown in May, 1Q21 sales & profitability are likely to be impacted due to 1) washout summer season sales and 2) high channel inventory (60 days) limiting primary sales. Also, with migrants...

Voltas (VOLT) 4QFY20 earnings were 37% ahead of expectation led by the UCP segments outperformance. However, the cut in our TP is limited as the EMP business commands lower Revenue was flat YoY at INR20.9b, (in line with est). Due to lockdowns, secondary sales could not materialize and as such, dealer level inventory stood as high as 60 days at end-Mar20. As primary sales were also impacted, company level inventory stood at 90 Inverter ACs now form 64% of the total Split AC business and 50% of the overall Room AC business. However, VOLT is looking to focus on cash flow rather than just top line growth in the EMP segment. Market share in Frost-free refrigerators and Washing machines We expect the system level inventory to normalize by Nov-Dec20, and hence, FY22E should turn out to be a normal year. Total order book stood strong at INR78b (+57% YoY).

Voltas had a stellar Q4, with main highlight being the 20% growth in the unitary cooling (compared to de-growth in teens for competitors) along with margin expansion and market share gains. Projects...

Our interaction with managements and dealers indicates significant prebuying activity of consumer goods during January-February 2020 on fears of supply related issues from China. While companies have secured supplies to avoid any disturbance in sales in Q4FY20, demand was negatively impacted in March 2020 owing to holiday and post that lockdown across countries. We also believe a late recovery in demand for consumer goods will also impact Q1FY21 performance due to 1) shortage of workers (due to heavy migration), 2) shift in focus on essential goods compared to discretionary products and 3) streamlining of supply chain....