Hold Voltas; target of Rs 560: ICICI Direct

ICICI Direct's research report on Voltas

Voltas’ topline growth of 37% YoY was largely driven by EMPS segment (contributes ~45% of total revenue) wherein segment revenue was up ~62% YoY owing to execution of domestic (led by electrification projects) and international orders. However, the UCP segment (contributes ~50% of total revenue) stayed underperformer with revenue growth of 8% YoY due to bad weather, unseasonal rains and weak Onam sales in Kerala (due to floods) Profitability of EMPS segment increased ~300 bps YoY to 8.4% largely led by positive impact of foreign exchange. However, a significant drop in profitability of UCP segment by ~600 bps YoY to 6.3% was mainly due to increase in input cost and rupee depreciation. We believe higher inventory at channel coupled with intense competition would keep the UCP segment performance under check for FY19E. We model revenue CAGR of 15% in FY18-20E led by ~16% revenue CAGR of EMPS segment.

Outlook

We ascribe a PE multiple of 15x FY20E and 10x FY20E earning to EMPS and EPS segment respectively. We maintain HOLD rating with a revised target price of Rs 560.