* Unitary cooling division (UCP) is likely to report revenue growth of 8% YoY, given primary channel filling, driven by a strong summer and LG vacating the fixed-speed air conditioning segment.
* We expect revenue growth of 6% YoY in the MEP segment, led by high base effect (37% YoY growth in 4QFY16). However, the key monitorable would be sustainability of margins in the segment. VOLT had booked EBIT margin of 3.9% in 4QFY16 on positive closure of certain old projects, provision reversal and higher margin new projects getting executed.
* Prevailing weak crude prices have raised apprehensions over the pace of order awards and also execution in the Middle East. Even in the domestic market, new project awards remain constrained. Maintain Neutral.
Key issues to watch
* Impact of LG vacating the fixed-speed air conditioning segment on VOLT’s market share and sales.
* Sustainability of profitability in the MEP segment and also capital employed in MEP business.
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