Way2Wealth neutral on Voltas

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Way2Wealth neutral on Voltas

Way2Wealth has maintained neutral rating on Voltas with a target of Rs 132, in its August 2, 2011 research report.

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Way2Wealth has maintained neutral rating on Voltas with a target of Rs 132, in its August 2, 2011 research report.

"Voltas has been hammered on all fronts which was hinted by the management last qtr & also expected, due to bad macro conditions prevalent in the domestic & the international markets as well as losses from its subsidiary Rohini Industrial Electricals which increased the burden."

"Order backlog declined by 9% at 45bn due to decline in international order book position which has reduced by 25% at 26bn. Domestic order backlog has increased by 28% at 19bn due to major order bookings from Airports at Kolkata and Chennai, Metro Rail in Chennai, AIIMS Hospitals in Delhi, Formula 1 in NOIDA, Tata Consultancy Projects in Gandhi Nagar, Chennai, etc. A negligible order inflow of Rs.2bn has been booked in the domestic market, showing a decline of 80% yoy, with no bookings from the international market. Rohini's stand-alone order book amounts to Rs.2.28bn. Consolidated sales have degrown by 4% led by degrowth in EMPS segment by 2% , EPS segment by 19% & UCP segment by 4%. The degrowth in the EPS segment is due to transfer of its Material handling division to the JV company. Operating profits have degrown by 15% due to losses incurred by Rohini Industrial as well effect of higher commodity prices & margin reduction due to intense competition & cost overruns in the Qatar project. Higher working capital led to incremental interest cost & higher depreciation has been shown due to change in policy norms. Consequently adj. PAT has reduced by 20% after removing the effect of its sale of Material handling business."

"At the CMP of Rs 135, the stock trades at 14x FY12E and 12x FY13E earnings of Rs10 and Rs11 respectively. With competition more intensifying both on the domestic & international front, political uncertainty in the Middle East, lower revenue visibility & higher commodity prices, we give a NEUTRAL rating as the stock seems to be fairly priced in with a target price of Rs 132 per share based on a PE of 12x FY13E EPS of Rs 11 per share," says Way2Wealth research report.

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To read the full report click on the attachment