Buy Voltas; target of Rs 685: Edelweiss

Edelweiss's research report onVoltas

A weak season coupled with pre-buying in Q3FY18 impacted industry growth in Q4FY18, leading to sharp 15% revenue miss for Voltas. Nonetheless, OPMs improved across cooling & projects segment which is commendable. Even as we trim FY19/20E earnings by 5/4% building in poor FY18 season, we expect Voltas to maintain its competitive edge with focus on right segments & strong distribution franchise.

Outlook

While Voltas sustains competitive edge in the value segment of room ACs, we see high potential in its new white goods segment, which adds substantially to its target market, offering immense value to long-term share holders. At CMP, the stock trades at 28/24x FY19/20E EPS. Maintain ‘BUY/SO’.

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