IGI Logo

We attended Voltas’s analyst meet, to gain deeper insight into its growth roadmap/demand environment. KTAs: 1) The management indicated prebuying activity ahead of the BEE rating changes wef 1-Jan-26 and inventories gradually depleting from 60 days (in Q2FY26) to 45 days (currently) vs 20-25 days (in Q3FY25). 2) The management flagged currency depreciation, elevated commodity costs, and the upcoming BEE norm transition as key variables that will influence pricing actions from Q4FY26. 3) Focus will remain on market share rather than margin. 4) UCP margin will remain sensitive to competitive intensity. 5) Beko continues to gain market share (a close #2 player in SAWM) and will expand distribution by leveraging its RAC distribution network. We expect growth/margin to rebound in FY27E (refer to our report ‘Untimely rain: Killjoy for AC demand, apt time to BUY AC stocks’). We maintain BUY on Voltas, with unchanged TP of Rs1,500, as valuations remain supportive (implied UCP P/S at ~3.6x, below the LTA) and expect earnings traction to improve as seasonality normalizes from H2

KTAs from the Analyst Meet

1) The management indicated that pre-buying activity is happening ahead of the BEE rating changes wef 1-Jan-26. It expects RAC performance to improve in Q3FY26E vs Q2FY26. 2) Average inventory level stands at ~45 days (vs 20-25 days in Q3FY25). Inventories are gradually normalizing, supported by dealer stocking due to the BEE transition. 3) Pricing decisions will be taken after evaluating the multiple cost and demand variables, including currency depreciation (with ~20-30% of inputs imported), rising commodity prices, upcoming BEE norm changes, and the recent GST rate reduction. 4) The management reiterated its commitment to protecting and growing its RAC market share, as demonstrated over the past 3-4 quarters. 5) UCP margin will remain sensitive to competitive intensity, given that some players are pursuing aggressive pricing strategies, which the management believes are structurally unsustainable. 6) The CR segment, including deep freezers and water coolers, is expected to see a meaningful pickup from Q4FY26E, contingent on summer conditions, with strong growth likely in Q1FY27E on a low base. 7) Voltas Beko continues to gain market share and witness healthy traction, even as overall industry performance is muted. 8) The management highlighted the ongoing channel expansion efforts by Beko, leveraging Voltas’s strong RAC distribution network. 9) Market-share gains are expected to continue, with Beko currently ~0.5-1.0% away from the category leader. 10) However, Beko remains relatively small in value share terms compared to larger incumbents. 11) Regionally, North India has been strong, and the company’s expansion into the South aligns with its strategy of being in the vicinity of customers, enabling cost savings on the logistics front along with incremental market-share gains. 12) In the Projects business, the domestic market continues to perform well, with strong opportunities in MEP and Commercial Air Conditioning (CAC), where CAC margins are high.

For More  Emkay Global Financial Services Ltd Disclaimer http://www.emkayglobal.com/Uploads/disclaimer.pdf & SEBI Registration number is INH000000354