Hold Voltas; target of Rs 608: Emkay Global Financial

Emkay Global Financial recommended hold rating on Voltas with a target price of Rs 608 in its research report dated August 17, 2020.

Broker Research

August 20, 2020 / 13:37 IST

Emkay Global Financial's report on Voltas

Voltas reported better-than-estimated numbers, with the UCP segment delivering another quarter of strong margins. It has showcased strong execution with a 60% decline in UCP revenue despite an unfavorable base of 47% in Q1FY20 and robust inventory push in Q4. The market share in RAC further improved ~200bps yoy/qoq to 26.2%. Slow execution and time-based provisioning impacted the projects segment’s performance with negative EBIT of Rs393mn. The total outstanding order book stood at Rs76.6bn. Management maintained its margin guidance for UCP at 11-12% despite the strong Q1 performance. VoltBek received a strong response for its DC refrigerators while it is facing supply challenges due to the labor shortage.

Outlook

The projects business will face execution and collections issues in the near term. The lowerthan-estimated decline in Q1 has led to a 5%-13% upgrade in EBITDA over FY21-23E. We maintain Hold and UW in EAP, with a revised SoTP-based TP of Rs608.

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