Buy Voltas; target of Rs 1700: ICICI Securities

ICICI Securities research report on Voltas

Voltbek, which is still in an investment mode, is likely to be value accretive from FY25, in our view. It has focussed on gaining volumes and market shares since its inception in FY18. We believe it will have market share of ~10% in its both the key categories i.e. refrigerators and washing machines in next couple of years. Its H1FY25, market shares in refrigerator and washing machine were ~5% and ~8%, respectively. We also model it to have low-mid single-digit market shares in categories like Dishwasher and Microwave ovens. Voltbek may reach revenues of INR25bn in FY25 and will be mostly EBITDA breakeven. As it will start generating earnings and cashflows, it will be able to fund growth from its internal accruals and will not be dependent on Voltas and Arcelik for additional capital. We also note Voltbek has been successful in creating competitive advantages such as (1) Voltbek brand, (2) distribution network of 11,400 outlets, (3) large portfolio of 298 SKUs across product categories and (4) Manufacturing unit at Sanand, Gujarat to launch differentiated products. We believe it will be able to add ~5% additional value to Voltas in FY27 and beyond. Maintain HOLD.

Outlook

We model Voltas to report revenue and PAT CAGRs of 20.8% and 71.7%, respectively, over FY24–27E. Maintain HOLD with DCF-based revised target price of INR 1,700 (earlier: INR1,645; implied P/E of 60/44x FY26/27E EPS).