Buy Voltas Ltd For Target Rs. 1,516 By PL Capital
Market share slips, outlook remains cautious
Quick Pointers:
* Volume growth of 36%/56% in UCP/Voltas Beko in FY25
* UCP EBIT margins expanded by 80bps to 10% in Q4FY25
We downward revise our FY26/FY27E earnings estimate by 6.6%/7.8% factoring slow demand for RAC, cost pressure for key components like compressors and copper tube, no price hikes and slow ramp up of Chennai plant. Voltas Ltd (VOLT) reported volume growth in line with the industry in UCP segment and anticipates demand recovery in upcoming quarters from extended summers and support from In Shop demonstrator. UCP EBIT margins expanded due to the better product mix in Industrial coolers and high energy efficient rated products. VOLT market share has declined slightly in RAC segment (YTD market share of 19% as on Mar’25 vs 19.5% as on Jun’24). Company has faced collection issues in its domestic project business and company is optimistic about the recovery in subsequent quarters. Voltas Beko saw volume growth of 56% FY25, with market share gain in refrigerators/washing machines/ Semi-Automatic Washing Machine at 5.3%/8.7%/15.3%. We estimate FY25-27E revenue/EBITDA/PAT CAGR of 15.7%/19.3%/20.8%. we revise SOTP-based TP to Rs1,516 (down from Rs1,593), implying PE of 41x FY27E earnings
Revenue up 13.4% and PAT at Rs2.4bn: Revenues grew by 13.4% YoY to Rs47.7bn (PLe: Rs50.9bn). Volume growth in the UCP segment was ~36% in FY25. Voltas Beko reported volume growth of ~56% in FY25. Gross margins expanded by 170bps YoY to 21.4% (PLe: 22.6%). EBITDA grew by 74.6% YoY to Rs3.3bn (PLe: Rs3.4bn). EBITDA margin expanded by 240bps YoY to 7.0% (PLe: 6.6%). UCP revenue grew by 17% YoY to Rs34.6bn and EBIT margin came in at 10% (+80bps YoY). EMPS revenue grew by 3.6% YoY to Rs11.4bn. The segment reported EBIT loss of Rs17mn vs loss of Rs1.1bn in Q4FY24. EPS revenue declined by 15.5% YoY to Rs1.3bn. EBIT declined by 28.7% YoY to Rs341mn, and margin contracted by 480bps YoY to 25.8%. PBT grew by 76.6% YoY to Rs3.8bn (PLe: Rs3.7bn). PAT grew by 107% to Rs2.4bn (PLe: Rs2.5bn). VOLT’s share of loss from JV and associates stood at Rs320mn.
ConCall Takeaways: 1) VOLT has maintained its leadership position in split and window air conditioners. It has a YTD market share of 19% as on Mar’25. 2) Voltbek reported volume growth of 56% YoY in FY25. 3) Voltas’s Rs3.9bn bank guarantees for a Qatar project remain unencashed amid ongoing legal proceedings; based on legal advice, the company sees strong grounds to defend claims and has made no further provisions. 4) EMPS order book for the project business reached Rs65bn. 5) Air cooler YTD Mar’25 market share at 8.5% securing a position among the top three brands. 6) VOLT has a YTD Feb’25 market share of 5.3%/8.7%/15.3% in refrigerators/washing machines/Semi-Automatic Washing Machine. 7) Company aims to localize its refrigerator manufacturing to strengthen its market presence in India. 8) Company faced challenges in secondary and tertiary sales due to delayed summer and unseasonal rains, which adversely impacted its market share and expects to improve by H1FY26. 9) Company has recommended a final dividend of Rs 7 per share.
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