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Earnings disappoint; UCP segment suffers loss

* VOLT’s revenue declined ~10% YoY to INR23.5b (in line) in 2QFY26, driven by 23%/5% decline in UCP/PES segments. EMPS revenue grew ~10% YoY. EBITDA declined ~57% YoY to INR704m (~33% below our estimates led by loss in UCP segment vs. estimate of ~3% EBIT margin). Overall OPM was at ~3.0%, down 3.2pp YoY (1.7pp below our estimates). PAT declined ~74% YoY to INR343m (~61% below our estimates).

* The UCP segment saw muted retail offtake due to the early monsoon’s lag effect and the GST rate cut, which led to deferred purchases and higher channel inventory. Despite these, it has gained market share sequentially. Margins were temporarily impacted by higher marketing spends and underabsorption at the new Chennai and Waghodia facilities. The EMPS segment helped in partly offsetting weak cooling business performance.

UCP revenue declines ~23% YoY; UCP loss at INR458m

* VOLT’s consol. revenue/EBITDA/adj. PAT stood at INR23.5b/INR704m/ INR343m (down 10%/57%/74% YoY and +4/-33%/-61% vs. our estimates) in 2Q. Depreciation/interest costs grew 49%/47% YoY, whereas ‘other income’ declined 39% YoY.

* Segmental highlights: UCP – Revenue declined 23% YoY to INR12.2b, and loss stood at INR458m vs. EBIT of INR1.2b in 2QFY25. EMPS – Revenue rose 10% YoY to INR9.7b, PBIT grew ~99% YoY to INR920m., and EBIT margin surged 4.3pp YoY to 9.5%. PES – Revenue declined 5% YoY to INR1.4b, EBIT increased ~11% YoY to INR439m, and EBIT margin expanded 4.6pp YoY to ~31.6%.

* In 1HFY26, revenue/EBITDA/adj. PAT stood at INR62.9b/INR2.5b/INR1.7b (down 17%/58%/63% YoY). UCP/PES segment revenue declined 24%/11% YoY to INR40.8b/INR2.7b, whereas EMPS segment revenue increased ~3% YoY to INR18.9b. UCP EBIT declined by 87% YoY to INR586m and EBIT margin declined 6.8pp YoY to 1.4%. The company reported operating cash outflow of INR10.7b vs. OCF of INR1.2b in 1HFY25, due to lower profitability and sharp increase in working capital (up by INR7.7b). Inventory remained elevated (rising by INR4.0b from Mar’25 to INR31.1b), historically a reversal trend witnessed in 1H. Its net cash balance declined to INR15.7b as of Sep’25 from INR28.5b as of Mar’25.

Valuation and view

* VOLT’s earnings disappointed due to the loss in UCP segment. High inventory remains a concerning factor amid new BEE norms and higher competitive intensity. The EMPS segment reported better-than-estimated revenue and margin, and we seek management guidance on factors driving this outperformance.

* We have a Neutral rating on the stock. However, we will review our assumptions following the concall on 14th Nov’25 (Concall Link).

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