Buy Voltas; target of Rs 2070: Motilal Oswal

Motilal Oswal's research report on Voltas

Voltas (VOLT)’s 2QFY25 earnings were above our estimates, led by higher-than-estimated revenue/EBIT growth in the UCP segment and higher margin in the EMPS segment. Revenue grew 14% YoY to INR26.2b (5% beat), while EBITDA jumped 131% YoY to INR1.6b (11% beat). OPM surged 3.1pp YoY to ~6% (+30bp vs. our est.). Adj. PAT jumped 265% YoY to INR1.3b (est. INR1.2b). Management indicated that VOLT maintains a leadership position in the RAC segment, with an exit market share of 21% as of Sep’24. It has seen strong growth in its Voltbek home appliances business, with a market share of 7.5% for washing machine, and 5% for refrigerators as of Sep’24-YTD. The AC segment has delivered strong growth during the summer season, and VOLT expects the other appliances business to continue to do well given the ongoing festive period. In the EMPS segment, project execution was hit by heavy rains. It expects business to return to normal levels going forward. We broadly retain our EPS estimates for FY25/FY26. We reiterate our BUY rating on the stock with a TP of INR2,070 based on 55x Sep’26E EPS for the UCP segment, 40x Sep’26E EPS for the PES and EMPS segments, and INR38/share for Voltbek.

Outlook

We project UCP’s margin at 8.3%/8.7%/9.2% for FY25E/26E/27E v/s 8.5% in FY24. We reiterate our BUY rating on the stock with a TP of INR2,070 based on 55x Sep’26E EPS for the UCP segment, 40x Sep’26E EPS for the PES and EMPS segments, and INR38/share for Voltbek.