Neutral Voltas; target of Rs 840: YES Securities

YES Securities' research report on Voltas

Voltas has delivered lowerthan expected revenue growth withUCP growing by 12.7% and EMPS segment growing 7.8%. Voltas continues to lose market with YTD February market share at 21.9%, while market share for month of February stood at 18.1%. Voltas has not taken any price increase in Q4, and future price increase will depend on market conditions and competition. Volt‐Bek has 26% volume growth in Q4 and FY23 growth for Volt‐bek is in range of 15‐18%. The projects business continues to be marred by provisioning related to international arising out of delay in certification and collections. The company has initiated legal actions to recover dues. On the positive side order inflow in the EMPS has remained strong with inflow amounting to Rs19bn in Q4 .We however continue to remain cautious on the stock with Neutral rating as 1) market share gains will be difficult to come by, 2) Margins in UCP are structurally trending lower, 3) Project business continues to face execution and collection challenges particularly in international geographies, and 4) Volt‐ beck continues to incur losses and is expected to take more time than estimated to achieve break‐even status.

Outlook

We now factor in FY22‐25E Revenue/EBITDA/PAT CAGR of 20%/36%/142% and maintain our neutral rating with SoTP based TP of Rs840. We have lowered our multiple in the products business (UCP) to 45x and value projects business at 25x (in line with peers). We see strong momentum for RAC continuing upcoming summer and steady improvement in project business.

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