STOCK IN FOCUS
* Voltas’ stock price rose 0.55% in yesterday’s trade, while the BSE Sensex down by 1%.
* We are positive on Voltas owing to its market leadership position with 22.1% market share in domestic room AC market led by strong growth in Tier-II and Tier-III cities. While the EMPS segment is expected to clock 11% CAGR, the UCP and EPS segments are likely to witness 10% and 14% CAGR, respectively during the same period.
* For its JV company – “Voltbek” plans to launch over 100 SKUs over the next three months including 44 SKUs of refrigerators, 40 SKUs of washing machines, 12 SKUs of microwaves/ ovens and 7 SKUs of dishwashers.
* We expect Voltas’ revenue and earnings to clock CAGR of 14% and 15% respectively through FY18-FY20E. Strong balance sheet with cash surplus, healthy margin profile (RoCE at 20% & RoE at 15%), dividend payout track record and ability to pass on rising input cost continue augur well for Voltas. At CMP, the stock trades at 26.8x FY19E and 22.8x FY20E earnings. We maintain our BUY recommendation on the stock with a Target Price of Rs692 (valuing the stock at 30x FY20E earnings).
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