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Cautious outlook as UCP margins under pressure

Quick Pointers:

* UCP EBIT margins contracted by 1,110bps to -3.8% in Q2FY26

* Voltbek grew in H1FY26 with market share gain in WM, Refs and SDA

We downward revise our FY27/FY28 earnings estimates by 8.8%/5.7% factoring in correction in UCP margins due to high promotional spending aimed at inventory liquidation & elevated fixed costs arising from low plant utilization. UCP segment declined due to extended monsoons, muted retail offtake & deferred purchase due to GST which resulted in higher channel inventory while margins contracted (-1,110bps) due to high marketing expenses & underabsorption at Chennai & Waghodia plant. VOLT market share has increased in RAC segment (YTD market share of 18.5% as on Sep’25 vs 17.8% as on Jun’25). Reduction in GST will drive a major traction in RAC demand in coming quarters as channel partners starts stocking up while BEE energy-efficiency transition from Jan’26 is expected to trigger pre-buying of old models & product upgrades, keeping near-term margins under pressure. Data centers contribute ~5% of EMPS revenue, expected to rise to ~30% driven by growing demand for MEP & cooling solutions. Voltbek continued growth momentum with market share gains across WM, Refs & SDA, partially offsetting weakness in cooling products. We estimate FY25-28E revenue/EBITDA/PAT CAGR of 9.5%/11.4%/12.6%. we revise SOTP-based TP to Rs1,411 (earlier Rs1,440), implying PE of 39x FY28E. Maintain ‘HOLD’ rating.

Q2FY26: Revenue decline 10.4% and PAT decline 74.4%: Revenues decline by 10.4% YoY to Rs23.5bn (PLe: Rs24.3bn). Gross margins contracted by 100bps YoY to 24.8%. (PLe: 23.0%). EBITDA decline by 56.6% YoY to Rs704mn (PLe: Rs995mn). EBITDA margin contracted by 320bps YoY to 3.0%. (PLe: 4.1%). UCP revenues decline by 23.2% YoY to Rs12.1bn and EBIT margin came in at -3.8% (-1,110bps YoY). EMPS revenues grew by 9.8% YoY to Rs9.7bn. EBIT margin expanded by 430bps YoY to 9.5%. EPS revenues decline by 5.2% YoY to Rs1.4bn. EBIT margin expanded by 460bps YoY to 31.6%. PBT decline by 61.9% YoY to Rs906bn (PLe: Rs1.6bn). PAT decline by 74.4% YoY to Rs 342mn (PLe: Rs991mn). VOLT’s share of loss from JV & associates stood at Rs365mn.

H1FY26: Revenue decline 16.6% and PAT decline 62.7%: Revenues decline by 16.6% YoY to Rs62.9bn. Gross margins contracted by 30bps YoY to 22.9%. EBITDA decline by 57.5% YoY to Rs2.5bn. EBITDA margin contracted by 380bps YoY to 4.0%. UCP revenues decline by 24.2% YoY to Rs40.8bn and EBIT margin came in at 1.4% (-680bps YoY). EMPS revenues grew by 3.2% YoY to Rs18.9bn. EBIT margin expanded by 130bps YoY to 7.5%. EPS revenues decline by 10.7% YoY to Rs2.7bn. EBIT margin expanded by 320bps YoY to 30.6%. PBT decline by 55.6% YoY to Rs3.2bn. PAT decline by 62.7% YoY to Rs 1.7bn. VOLT’s share of loss from JV & associates stood at Rs624mn. Voltbek continued its growth trajectory in H1FY26, gaining market share across WM, Refs & SDA.

ConCall Takeaways: 1) VOLT maintained RAC leadership with YTD market share of 18.5% as on Sep’25 vs 17.8% as on Jun’25. 2) Between VOLT & its channel partners, inventory levels of ~2months are expected to ease in the coming months. 3) EMPS order book for the project business reached Rs62bn, Rs48bn for domestic projects and Rs14bn for international. 4) UCP margins temporarily impacted by higher marketing cost & under absorption in new Chennai & Waghodia plant. 5) Data centers contribute ~5% of EMPS revenue, expected to rise to ~30%. 6) Company expects strong H2FY26, driven by the reduction of GST for RAC & BEE efficiency transition (Jan’26), driving upgrades & channel stocking. 7) Voltbek ranks 2 nd in market share in semi-automatic WM category. 8) Voltbek’s expanding retail and online presence is driving strong sales momentum, keeping it on track to achieve EBIT breakeven

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