Buy Voltas; target of Rs 1800: Motilal Oswal

Motilal Oswal's research report on Voltas

Voltas (VOLT)’s management in the 1QFY25 earnings call indicated that it maintains its leadership position in the RAC segment, with a market share of 19.5% in 1QFY25. It maintains margin guidance to be in the high single-digit, with continuing leadership position in the RAC segment. In EMPS, domestic business grew 50% YoY, whereas in international business, the UAE and Saudi Arabia continued to deliver healthy growth. It also highlighted that in respect of claims pertaining to FY23, the arbitration was awarded in the company’s favor. However, the collection of the proceeds will take some time. Though the second quarter remains a lean period for cooling products, the start of the festival season would lead to a spurt in demand.

Outlook

We expect UCP’s margin to improve to 8.8%/9.3%/9.5% for FY25E/26E/27E vs. 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’26E EPS for the PES and EMPS segments, and INR38/share for Voltbek.