Reduce Voltas; target of Rs 750: HDFC Securities

HDFC Securities recommended reduce rating on Voltas with a target price of Rs 750 in its research report dated April 27, 2023.

Broker Research

April 29, 2023 / 10:23 IST

reduce

HDFC Securities' research report on Voltas

Voltas positively surprised on both UCP revenue and margins despite twin challenges of weak consumer sentiment and delayed summer. UCP business grew by 13% YoY (HSIE +10%) with volumes growing across categories. The UCP EBIT margin came in at 10% (HSIE 9.4%). Voltas continues to retain its #1 position in RAC, but YTD market share in Feb’23 further dipped to 21.9% (vs 22.5% YTD Dec’22). Market share in Jan/Feb was even low at 18%. After last year’s market share loss, we had modelled a lower EBIT margin but stability in market share. The consistent fall in market share is reflecting inadequate efforts to fix the competitive pressure. Furthermore, the summer season is still not set fully, leading to a miss in industry tailwinds.

Outlook

We cut our FY24/FY25 EPS estimates by 3/4% to factor in weak RAC dynamics and cut our target UCP multiple to 32x (earlier 38x). Our SoTP (UCP/EMPS/EPS P/E at 32/15/15x and Volt-Beko P/S of 4x) on Mar-25 derives a TP of INR 750. Downgrade to REDUCE.

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