Buy Voltas; target of Rs 663: HDFC Securities

HDFC Securities' research report on Voltas

Voltas’ reported a strong quarter with 6% primary growth in RAC during an erratic summer. RAC market (secondary level) declined by ~10% while Voltas was flat. Voltas’ channel inventory is at normal levels (60 days) which gives us bettervisibility in the upcoming quarter. It was encouraging to note that Voltas gained market share (23.5% share; up 130bps) when MNCs have raised their game (Daikin and LG). As stated earlier, we backed Voltas (market leader) to bounce backduring a tough period.

Outlook

We increase our earnings by ~3% owing to strong performance in RAC in 1Q and consistent improvement in EMPS margin. We value based on SOTP, valuing EMPS/EPS/UCP at Jun-20 P/E at 17(15 earlier)/20/35x with TP of Rs 663 (Rs 638 earlier).

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