Neutral Voltas; target of Rs 1350: Motilal Oswal

Motilal Oswal's research report on Voltas

Voltas (VOLT)’s 1QFY26 earnings were below our estimate. Revenue dipped ~20% YoY to INR39.4b (-10% vs. estimate), due to ~25%/16%/3% YoY decline in UCP/PES/EMPS revenue. EBITDA declined ~58% YoY to INR1.8b (~43% miss, led by lower-than-estimated revenue/margin in the UCP segment). OPM contracted 4.1pp YoY to 4.5% (2.7pp below our estimate). PAT declined ~58% YoY to INR1.4b (~42% miss) for the quarter. Management highlighted that 1QFY26 was a challenging period as growth momentum turned adverse in May’25. The weak summer season led to a significant drop in peak season demand for ACs and other cooling products. VOLT believes the performance dip in 1QFY26 was temporary, and it is taking corrective actions, including cost-control measures, inventory realignment, and production adjustments. Management remains cautiously optimistic about a recovery in the coming quarters, aided by the upcoming festive season and the possibility of a second summer in certain regions. It expects industry to close FY26 flattish to modretae growth.

Outlook

We maintain our Neutral rating on the stock with a TP of INR1,350 based on 45x Jun’27E EPS for the UCP segment, 20x Jun’27E EPS for the PES and EMPS segments, and INR22/share for Voltbek.