Emkay Global Financial's report on Voltas
With UCP segment growth of 9.9% yoy coming in much below our estimate of 18%, Voltas’ Q4 was a miss overall. The loss of ~500bps in RAC market share yoy to ~18% in March, which management attributed to high competitive intensity in South India, led to the miss. EBITDA margins declined sharply by 268bps yoy to 9.8% due to lower gross margins amid commodity inflation and heightened competitive intensity. UCP’s margins fell by 522bps to 10.6%. Margins of the EMPS segment, however, were relatively steady at 6.9%. Management said it has taken measures to regain lost market share and targets to reach the prior levels by Jun’22. However, our channel checks suggest Voltas’ share was weak in Apr’22 as well. Margins should remain suppressed while VOLT tries to regain share.
We cut FY22-24E revenue/EBITDA by 4-7% due to lower growth in EMPS and margin compression in UCP. We also reduce our multiple for UCP to 43x from 45x on higher CoE. Maintain Hold with a revised SoTP-based Jun’24E TP of Rs1,000 (Rs1,150 earlier).
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