Prabhudas Lilladher's research report on Voltas
We cut our FY23-FY24 earnings by 9-10% largely on account of cut in margin estimates, due to continued commodity inflation and increased competitive intensity. We noticed that Voltas share price declined 17% over concerns of losing market share in room AC segment after a long time. The company reported market share of 23.4% YTD (vs 25.8% YTD Nov 2021) largely due to aggressive pricing by competitors, particularly in southern markets. Management believes that market share will recover in rest of the summer season with pricing action and customer centric schemes. We continue to like VOLT for longer term given 1) leadership position in high potential RAC segment 2) comfortable balance sheet (Rs6.45bn net cash) and 3) restructuring in B2B business with focus on B2C.
We estimate 35% EPS CAGR over FY22-24 and assign ‘HOLD’ rating with SOTP based TP of Rs1,071/- (valuing UCP business at 46x FY24EPS). We have not cut our target multiple for UCP segment, considering the company will soon be able to recover its market share.
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