Accumulate Voltas; target of Rs 564: Prabhudas Lilladher

Prabhudas Lilladher's research report on Voltas

VOLT gave a cautiously optimistic outlook given 1) outperformance in the UCP segment (50% growth vs 30% of industry in 11MFY20) and 50bps market share gain across RAC segments 2) encouraging response to VOLTBEK portfolio with 2% market share in key segments and 3) improved order book in MEP led by domestic operations. Although the industry is witnessing reasonable demand post lifting of lockdown in May, 1Q21 sales & profitability are likely to be impacted due to 1) washout summer season sales and 2) high channel inventory (60 days) limiting primary sales. Also, with migrants returning to their hometowns, the pace of execution in MEP segment is likely to slow down in the near term. Although Voltbek JV launched mass market products in refrigerators and washing machine post commissioning of Sanand facility, lockdown might result in near term pressure on sales. We expect JV to report a loss of Rs1.5bn/Rs1bn in FY21/22.

Outlook

Maintain Accumulate with SOTP based target price of Rs564/- (valuing UCP business at 32xFY22 EPS).

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