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Last Updated : Nov 18, 2016 08:25 AM IST | Source: Moneycontrol.com

Voltas tanks 9%; CLSA cuts target, sees demonetisation impact

Voltas shares plunged 9 percent intraday Thursday after CLSA slashed target price on the stock to Rs 305 (from Rs 345), citing uncertainty for Q3 & Q4 due to demonetisation and GST.

 
 
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Moneycontrol Bureau


Voltas shares plunged 9 percent intraday Thursday after CLSA slashed target price on the stock to Rs 305 (from Rs 345), citing uncertainty for Q3 & Q4 due to demonetisation and GST.


With retaining sell rating, the brokerage house slashed FY17/18 EPS estimates by 2/5 percent with potential downside risks to earnings, depending on how end-user demand pans out after things settle down in a few months. Despite the recent correction, Voltas is trading above its long term average PE multiple of 19x, creating risks of further derating if uncertainty continues longer than expected, it says.

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It believes nervousness among investors on the potential fallout of the currency ban on discretionary spending, along with lack of clarity on the transition impact of GST during Q4FY17, has created an uncertain environment for Voltas for the next two quarters, as reflected in the 17 percent stock correction over the last month.


According to its research note, scrappage of high-denomination currency announced last week will likely negatively impact the real estate and commercial construction sectors, which in turn will impact UCP (unitary cooling products) volume growth. Channel checks suggest 30-50 percent of AC sales by dealers are on a cash basis, which is likely to get impacted for a few months. This may impact the second best season (for volumes) for Volta's in Q4, CLSA feels.


Voltas' Q2 profit increased 7 percent YoY, led by higher other income. EBITDA grew by 6.5 percent and margin expanded by 80 basis points but revenue declined more than 6 percent YoY, led by weak execution in MEP and engineering products segments. UCP segment sales grew 15 percent YoY on a low base and festive season demand.


At 14:13 hours IST, the stock was quoting at Rs 303.25, down Rs 25, or 7.62 percent amid high volumes on the BSE.

Posted by Sunil Shankar Matkar



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First Published on Nov 17, 2016 03:02 pm
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