Voltas looks attractive, says Mayuresh Joshi

Mayuresh Joshi of Angel Broking told CNBC-TV18, "If you look at the business model of Voltas, 20 percent market share is already there at this point in time. The two key segments that they operate out of the electro-mechanical projects (EMP) segment and unitary cooling products solutions segment, the EMP has not been doing so well over the past so many quarters but our own expectations is that with legacy orders coming almost to an end with an order book of close to Rs 3,514 crore odd, 1.4 times book to build, the EBIT margins on this segment will slowly and steadily improve from 1 percent to 5 percent over the next two to three years." "Having said that, the next few triggers with related to the Qatar World Cup to Dubai Expo gives huge amount of opportunities for player like Voltas even in a scenario where oil prices are expected to remain very tight ranged. On the unitary cooling solutions, 72 percent contribution on the EBIT comes from this part. It is growing at a very healthy pace; 10,000 plus retail touch points, models getting introduced, after sales and services getting strengthened. All these factors would probably ensure that EBITDA margins even on consolidated basis should improve drastically for the company," he said. "In terms of cash flows, the company has been generating reasonable cash flows over the last three years with Rs 600-620 crore which is generated and largely again in terms of RoE expansion, our own sense is from 16 percent that the company is generating right now 19 percent is easily feasible. So, to sum up the financials, my own take is that 10 percent growth in terms of topline and 13-14 percent in terms of bottomline is what we probably are witnessing right now in terms of the heat wave, the kind of AC sales that are expected to go through specifically for this quarter. I think that will have a huge amount of impact in terms of how the volume growth for the company will also happen as well as market share gains," he said. "We are finding it extremely attractive even at this time 18 times FY'17 earnings and my own take is that the stock is expected to do well over the next two years' time horizon."