Buy Voltas; target of Rs 1640: Motilal Oswal

BUY

Motilal Oswal's research report on Voltas

Voltas (VOLT)’s 3QFY25 EBITDA was largely in line with our estimate as higherthan- estimated revenue was offset by lower-than-estimated margin in UCP (5.9% v/s estimated 7.8%). Revenue grew 18% YoY to INR31.1b (10% beat), while EBITDA surged 6.7x YoY to INR2.0b, albeit on a low base (in line). OPM jumped 5.3pp YoY to 6.4% (-30bp vs. our estimate). It reported a profit of INR1.3b (-14% vs. est. due to lower other income) vs. a loss of INR304m in 3Q. Management indicated that the pressure on UCP's margins is due to its focus on gaining market share, which involved significant spending on advertising, promotions, and in-store demonstrations. It aims to retain the UCP segment’s margin in the high single digit in 4QFY25. With the upcoming summer season, management remains optimistic about strong demand across product categories, aided by positive consumer sentiment.

Outlook

We estimate UCP’s margin at 7.6%/8.0%/8.5% for FY25E/26E/27E vs. the previous estimate of 8.3%/8.7%/9.2%. We reiterate our BUY rating on the stock with a revised TP of INR1,640 (earlier INR2,190) based on SoTP with 50x Dec’26E EPS (earlier 55x) for the UCP segment, 25x Dec’26E EPS for the PES and EMPS segments, and INR22/share for Voltbek (earlier INR38/share).

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