IGI Logo

Regaining momentum

Largest Air Conditioning company in India: Incorporated in 1954, Voltas Ltd. (Voltas), a part of multinational conglomerate, the Tata group, is India’s leading air conditioning company with strong presence in unitary cooling products, engineering projects, and engineering product and services. It is the market leader in the room air conditioner category with a market share of 24.1% as on June-22. The company entered the home appliance segment through a 50:50 joint venture with Arcelik (VoltBek).

Undisputed leader in a highly underpenetrated industry: The Indian AC market valued at Rs. 193 billion is expected to register double digit growth over FY21-26 given the under penetration of ACs in India (4% v/s global average of 30%). Moreover, increasing affordability, rapid urbanization, and changing lifestyle are key long term structural growth drivers. The government’s PLI scheme in white goods would also propel growth for domestic manufacturing companies and reduce import dependence. Voltas would be the biggest beneficiary of positive industry growth trend and we expect it to maintain its leadership in the room AC segment on the back of its strong brand connect, pan-India distribution presence and strong product portfolio.

Partnership with Arcelik bodes well for Voltas: Voltas is also present in the fast growing home appliance market through its JV with Arcelik. The company offers wide range of products including air coolers, water dispensers, water coolers, commercial refrigeration and commercial air-conditioning products. Given the under penetration of the aforementioned products coupled with Arcelik robust R&D and Voltas strong distribution network would help the company to grow faster than the industry. The management has targeted 10% market share in the home appliances market by 2025.

Voltas EMPS business to witness healthy recovery: Voltas EMPS (Electro Mechanical Projects & Services) business constitutes 34% of its consolidated revenue and we expect healthy recovery going forward both in the domestic and as well as the exports market. This would be driven by strong order book (Rs. 5,800 cr), overall economic recovery and increased government impetus on infrastructure.

Valuations: After a weak show in Q1FY23 mainly due to margin pressure, we expect financial performance of Voltas to improve going forward led by improving demand scenario. Moreover, easing in key raw material prices would also aid margin going forward for the company. Factoring this, we expect Revenue/EBITDA/PAT to grow at a CAGR of 16%/22.6%/26.7% over FY22-24E. We recommend a Buy rating on the stock with a target price of Rs. 1,150.

To Read Complete Report & Disclaimer Click Here

Please refer disclaimer at https://www.religareonline.com/disclaimer

SEBI Registration number is INZ000174330

Views express by all participants are for information & academic purpose only. Kindly read disclaimer before referring below views. Click Here For Disclaimer