Voltas outlook: Analyst recommends holding stock amid weak Q3 but sees long-term growth

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Investors holding shares of Voltas should exercise patience and maintain their positions, as the stock's long-term growth prospects remain intact despite a challenging third quarter, according to Siddhartha Khemka, Head of Research, Wealth Management, Motilal Oswal Financial Services. Speaking on CNBC TV18, Khemka advised against making fresh entries into the stock at the current juncture, recommending a 'hold' for those already invested.

The market expert highlighted that the third quarter continued to be weak for Voltas's room air conditioner (AC) segment, a trend also observed with competitor Blue Star. This weakness was attributed primarily to an extended winter season and elevated channel inventory, which stood at approximately 45 days. In response, the company has been focusing on price and inventory normalisation, notably by fully passing on the benefits of a Goods and Services Tax (GST) cut to consumers.

Looking ahead, a potential catalyst for the company could be the upcoming changes in energy labelling standards. Khemka suggested that these new regulations could trigger a wave of channel restocking, which in turn could lead to an improvement in sales. While the current financial year might continue to present challenges, the analyst expressed confidence in the company's future, a sentiment reportedly shared by Voltas's management.

"The management is very confident about the long-term growth prospects and we also believe with the structural changes now in place, there is definitely scope for growth," Khemka said. It was also noted that the downtrend in the stock appears to be bottoming out. The core message for investors is to be patient, as the fundamental long-term growth story is still believed to be positive, even if near-term performance remains subdued.