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Result Synopsis

Voltas has delivered better than expected revenue growth with UCP growing by 51% (higher than peers like BLSTR and Lloyd) and EMPS segment growing 40% on improved execution as order backlog continues to be robust. Voltas has outperformed industry in terms of revenue growth in UCP. It’s YTD market share of 19.5% has seen improvement of ~50bps, while its June’24 exit market share stood at 21.2%. UCP margins at 8.6% have been lower than estimates as commercial Ac and refrigeration margins were impacted on quality control orders, where company had to sell product at lower prices. Volt?Bek continues to see strong traction with washing machine and refrigerator market share standing at ~8% and 5% respectively. The projects business margins at 7.1% have been positive surprise, the company expects mid?single digit margin in the project business to be sustainable going forward. Order?booking has been subdued as company has been cautious in booking orders and there was impact of elections. The company expects order? booking to improve from 2HFY25. The company’s carried forward book stands at Rs75bn which is 8% lower on yoy basis. On the positive front the arbitration verdict is in the favor of the company and there is the possibility of write?backs, however the process is time consuming. We remain positive on the stock as 1) UCP is expected to continue its outperformance given the strong distribution reach and after sales service; 2) Project business is now expected to be profitable on sustainable basis; 3) Voltas?Beko is getting prominence in the market and losses are coming down. We assign Neutral rating with PT of Rs1,675

Voltas being a market leader with solid distribution presence and increasing product offerings on the commercial refrigeration and RAC segments should further improvement in market share. Q1 has seen continuing outperformance on RAC front with market share gains. Volt?Bek JV has stared gaining prominence in the market and localized production is expected to increase efficiency and bring down losses. Management is guiding for 4?5% margins in the project business to be sustainable vs the losses since past 6 quarters. We now factor in strong RAC revenue growth in FY25with margins of 8.7%. We maintain our multiple in the products business (UCP) and project business as company has started to win back market share without significantly compromising on the margins resulting in SoTp based PT of Rs1,675 with NEUTRAL rating. We see strong momentum for RAC continuing in FY25 on low channel inventory and buoyant demand.

Result Highlights

* Quarter summary – Voltas delivered strong revenue growth with revenue growing 46.5% yoy. UCP registered revenue growth of 51%, EMPS (Electromechanical Projects and services) registered growth of 40%.

* UCP –: Revenue grew 51% yoy. UCP business has outperformed industry and peers. UCP volumes grew by 67% in Q1. Its market share in RAC stood at 19.5% as on YTD March’24.

* EMPS- Revenue grew 39.8% yoy on improved execution and robust order book. The company has registered EBIT margin of 7.1%, which has been highest since Q1FY20. The company expects mid-single digit margin to be sustainable.

* Volt-Bek – Voltas beko continues to see strong traction. Its market share in washing machine stands at ~8%. Volt-Bek has become one of the top three player in the semi-automatic washing machine. In Q1FY25 it has achieved more than 50% volume growth in both washers as well as refrigerators.

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