Buy Voltas; target of Rs 1800: Motilal Oswal

Motilal Oswal's research report on Voltas

Voltas (VOLT)’s 1QFY25 performance was above our estimates, led by higher-than-estimated revenue growth in the UCP and EMPS segments, and a profit in EMPS vs. our estimate of a loss. Revenue stood at INR49.2b vs. est. INR39.4b. EBITDA was INR4.2b v/s est. INR2.6b. OPM surged 3.1pp YoY to 8.6% (est. 6.6%). Adj. PAT jumped 159% YoY to INR3.3b (est. INR1.9b). The management indicated that UCP’s overall volume grew 67% YoY in 1Q, and it maintained its leadership position in the RAC segment with an exit market share of 21.2% as of Jun’24. In EMPS, domestic projects continued to grow, and the outlook remains positive. Whereas, in the international project, the UAE and Saudi Arabia have delivered good performance leading to revenue growth, which, along with strong execution and controlled costs, has led to profits following losses in the last six quarters.

Outlook

We expect UCP margin to improve to 8.8%/9.3%/9.5% for FY25E/26E/27E v/s 8.5% in FY24. We reiterate our BUY rating on the stock with a revised TP of INR1,800 (vs. INR1,670) based on 50x Sep’26E EPS for the UCP segment, 35x Sep’26 EPS for the PES and EMPS segments, and INR38/share for Voltbek.