Accumulate Voltas; target of Rs 658: Prabhudas Lilladher

Prabhudas Lilladher's research report on Voltas

Voltas has given cautiously optimistic outlook with strong topline in EMP segment while UCP remains under pressure due to poor season and impact of higher costs and INR depreciation. Although Voltas has retained market leadership in UCP, limited pricing power will curtail margin expansion from current levels of 11-12%. Although it is looking at reducing the proportion of imported components, medium term outlook depends upon next season and INR-USD. Better quality of orders, effective execution, improving economic activity in GCC countries will lead to increased opportunities in MEP helping maintain the margins in 7-8% range. Although white goods launch under the brand Voltas-Beko is positive, it needs considerable scale up and investment before it starts contributing positively.

Outlook

We estimate 10% PAT CAGR over FY18-20. Maintain Accumulate with target price of Rs658 (31.5xFY20 EPS).

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