Buy Voltas; target of Rs 1000: Motilal Oswal

Motilal Oswal is bullish on Voltas recommended buy rating on the stock with a target price of Rs 1000 in its research report dated September 05, 2023.

Broker Research

September 06, 2023 / 12:25 IST

Buy

Motilal Oswal's research report on Voltas

Leadership to sustain in RAC: Voltas (VOLT) is a market leader in the room air conditioners (RAC) segment. Its share had gradually risen to 25.2% in FY21 (from 20.8% in FY15) before declining to 23.4%/21.6% in FY22/FY23. We estimate VOLT to lead the RAC segment with a market share of 21-22% in FY24/25. Voltbek’s losses continue but strong revenue traction visible: Voltbek (Voltas Beko) posted volume growth of 45%/15-18% YoY in FY22/FY23. The segment achieved a cumulative sales volume of over 3.3m units until FY23. Voltbek’srevenue rose 17% YoY in FY23 with an operating loss of INR1.6b. We estimate Voltbek to be profitable at operating level in FY26 and it should start contributing to profitsin FY27. EMPS segment to recover aided by strong order book: Electrical, mechanical and plumbing solutions (EMPS) segment caters to industrial customers in GCC as well as in domestic markets. The segment was hit in FY23/1QFY24 led by write-offs in the international business. However, we believe the strong order book of INR81.9b (INR52.4b of domestic and INR29.5b of international orders) will drive revenue growth and margin should improve in 2HFY24.

Outlook

We reinitiate our coverage on VOLT with a BUY rating and a TP of INR1,000 premised on 40x FY25E EPS (similar to last 10 years’ one-year forward average P/E multiple, before losses of Voltbek) and INR38/share for Voltbek. We expect VOLT to retain a market share of 21%+ over the next few years as it would continue to enjoy the leadership position in RAC segment.

For all recommendations report, click here