MOSt retains sell on Voltas as room AC segment to feel GST heat in Q1FY18

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26 Aug, 2025 12:21

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Motilal Oswal has maintained its sell rating on Voltas with a target price of Rs 400 (implying 16 percent downside), citing likely impact of GST on its room AC segment growth in Q1FY18. The stock fell more than a percent intraday Wednesday, in addition to 0.7 percent loss in previous session.

"Cautious view is driven by threat to margins from intensifying competition in the room AC segment; industry convergence toward inverter ACs, where Voltas has a weak share; and inventory destocking prior to likely GST implementation in July 2017 and rating change in January 2018," the research house reasoned.

According to brokerage house, growth in the room air conditioning (AC) segment is expected to be flat YoY in Q1FY18 as dealers avoid fresh buying and resort to destocking/inventory clearance due to the likely implementation of GST in July 2017.

The key concern for dealers has been claiming excise duty refund post the implementation of GST. There has been a clear preference for cash flows among dealers, it feels.

The month of July is expected to see muted demand due to the onset of monsoon, and a revival is likely during the festive season later this year, according to the research firm.

Motilal Oswal said Voltas expects pricing for room ACs to remain stable, with the rise in commodity prices likely to be offset by rupee appreciation.

The company also expects margins to stabilise at 11-12 percent over the long term, as against 14.5 percent in FY17. Rationalisation of margins would be driven by high competitive intensity in the industry; and focus on maintaining market share with an 11-12 percent margin profile.

The research house said Voltas would prefer to lose market share rather than compromising on margins (11-12 percent). The company expects market shift toward inverter ACs to be gradual.

At 14:39 hours IST, the stock price was quoting at Rs 468.45, down Rs 2.10, or 0.45 percent on the BSE.

Posted by Sunil Shankar Matkar