Hold Voltas; target of Rs 1030: Prabhudas Lilladher

Prabhudas Lilladher's research report on Voltas

Voltas share price corrected after Q4FY22 results, over concerns of losing market share in room AC segment. However, it recovered to 24.1% in Jun-22 as compared to 23.4% YTD in Mar-22 (vs 25.8% YTD Nov-21), thanks to pricing action and customer centric scheme. Market share recovery has also happened at the expense of margins (6.4% in 1QFY23) and management indicated prolonged weakness in margins, due to rising inflation and competition. We believe that Voltas will be able to fully recover its market share in the near term, with its strong brand presence and wide product portfolio. We continue to like VOLT for longer term given 1) leadership position in high potential RAC segment 2) balance sheet comfort (Rs6.45bn net cash) and 3) restructuring in B2B business to focus on B2C.

Outlook

We estimate 35% EPS CAGR over FY22-24 and maintain ‘Hold’ rating with SOTP based TP of Rs1,030 (valuing UCP business at 46x FY24EPS). We have not cut our target multiple for UCP segment as we believe the company will be able to fully recover market share, going forward.

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Voltas - 050822 - prabhu