Accumulate Voltas; target Rs 115: P Lilladher

Prabhudas Lilladher is bullish on Voltas and has recommended accumulate rating on the stock with a target price of Rs 115 in its March 18, 2013 research report.

"Voltas highlighted that though the overall domestic market continues to be subdued, company continues to see order inflow and enquires, largely from Industrial segment and IT/ITES sector. It also highlighted that the increased breadth in terms of offering in domestic markets (industrial, urban infrastructure etc.) has helped order flow in the prevailing tough market environment. As far as international markets are concerned, management expects awarding activity to pick up in the second half of the calendar year. However, the company has highlighted that it is not aggressively chasing orders with low margins and decided to stick to projects offering decent margins and better cash flows.

Our channel check expects the Saudi Arabia market to continue to remain robust (one of the few markets that was ordering in the last two years), driven by its large demography and infrastructure needs. In the Qatar market, tendering for FIFA-related projects has already started and awarding activities are likely to pick-up by mid 2013. The Kuwait market, despite political uncertainties, is likely to come up with a lot of tenders. Dubai has started to significantly show an increase in tourist traffic and there has been an increase in the real estate prices over the last 12-18 months. The Dubai government has started talking in terms of big investment plans which could throw up opportunities in the next 12-18 months. Abu Dhabi has very few/limited large projects to offer currently."

"Business across the industry during the current year was significantly impacted by economic uncertainties, coupled with generally lower disposable incomes, higher prices and poor consumer sentiment. The Room AC segment saw degrowth of 7% for CY12 (GfK Nielsen figures). However, over the nine months period of the current fiscal, Voltas has sustained its leadership position in ACs since May 2012. The 'All Weather' proposition has appealed to both consumers and trade by addressing market needs of the winter months and helped secure better sales growth, especially in the Northern markets. While January/February were slightly subdued in terms of demand, the company believes that the scheduled launch of the new product range, coupled with a customer-oriented marketing thrust, will help continue the build-up and penetration to seize the untapped potential in the market and outperform the market growth. ! Outlook and Valuation: The stock is trading at 10.4x FY14E earnings. We continue to believe that the worst might be behind us, given that the provisions on cost overruns on the Sidra project have already been accounted for."

"The outlook might be slightly muted in the near term on order flow and margins, given the increased reach in terms of geography in international markets and business segments in the domestic market which should help order flow once cycle turns. We believe investor with investors can start 'Accumulating' stock at the current level for a target price of Rs 115," says Prabhudas Lilladher research report.

Bodies Corporate holding more than 50% in Indian cos

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