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VOLT’s consolidated sales grew 42% YoY to Rs42bn, 17%/10% above our/consensus estimate. UCP sales jumped 44% YoY to Rs29.6bn, driven by 72% RAC volumes growth. EMPS sales rose 47% YoY to Rs10.9bn led by strong execution of domestic and Saudi Arabia orders. However, margins were softer as gross margin fell 180bps YoY to 19.8% while EBITDA margin fell 290bps YoY to 4.5% (vs. our/consensus of 6.7%/6.8%). Larger than expected loss in EMPS at Rs1.1bn and lower than expected EBIT margin in UCP at 9.2% (down 80bps YoY despite strong volume growth) affected operating margins as well as bottom-line. PAT fell 19% YoY to Rs1.2bn, much below our/consensus estimate of Rs1.9bn/Rs2.1bn. Voltbek JV loss was Rs383mn, in similar quarterly range since past 2 years. UCP’s Q1FY25 growth outlook is robust led by intense summer, while its EBIT margin will be in high single digit for FY25. EMPS may not need further provisions in Qatar. We marginally tweak our EPS estimates for FY25E/26E. Upgrade to REDUCE, rolling forward our valuation to FY26E with a revised SoTP target of Rs1,300.

UCP update: UCP sales rose 44% YoY to Rs29.6bn in Q4, led by 72% YoY volume growth in RAC. In FY24, RAC volumes were 2mn units, up 35% YoY, vs. likely industry size of 10mn units (up 20% YoY), leading to 20% market share for VOLT at primary sales level. As per third party data, VOLT’s FY24 market share was 18.7% across MBO (multi-brand retail outlets). VOLT has enhanced its retail counter reach to 26,000 outlets through all channel partners and continuesto strengthen its presence in allied channels such as e-commerce. Its new RAC plant at Chennai will be commissioned by end-May’24, and will add 1mn capacity initially and 1mn in second phase as per the need. The current Pantnagar plant has ~1.5mn capacity. Collectively, both plants capacity will rise to 2.5mn units for FY25 and 3.5mn units in three years. Overall UCP segment registered 27% volume growth and 26% value growth in FY24 led by RAC, Commercial AC (Rs13bn sales), Commercial refrigeration (Rs10bn sales), Air Coolers and Water heaters. EBIT margin was at 9.2% in Q4 (down 80bps) and 8.5% in FY24 (+20bps) and will remain in high single digit in FY25.

EMPS update: EMPS sales rose 47% YoY to Rs10.9bn. Growth was led by domestic projects segments and Saudi Arabia orders. EBIT loss continued in 4QFY24 at Rs1.1bn but VOLT believes that there won’t be any further provision in Qatar except few contingent liabilities. Domestic/overseas order book was at Rs50.2bn/Rs30.3bn.

Voltas-Beko JV update: The JV reported 53% volume growth across all product categories with sales of Rs15.9bn in FY24 vs. Rs10.9bn YoY. Cumulative volumes since inception were at 5mn units. Market share is 5.3% in refrigerators, 15% in semiautomatic washing machine and 8.5% in overall washing machines.

Assign REDUCE rating with revised target price of Rs1,300

We expect 17% revenue CAGR over FY24-26E but a highly suppressed base will result in 102% earnings CAGR (19.6% CAGR over FY22-26E). We assign REDUCE rating as we believe current valuations are factoring in a highly optimistic scenario of high growth in UCP in FY25/26 on a high base of FY24 along with increase in margin profile.

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