Voltas, IGL, Sonata Software, Deepak Nitrite, IRB Infra, Dilip Buildcon, Stylam Q2 Review — HDFC Securities

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HDFC Securities Institutional Equities

Voltas - Cooling division margin negative for first time in decade

Voltas Ltd.’s revenue declined 10% YoY to Rs 23.47 billion, mainly due to a 23% decline in the unitary cooling products segment, which was affected by a prolonged monsoon, high channel inventory, and deferred purchases following the GST cut announcement.

UCP segment’s Ebit margin was -3.8% vs 7.4/3.7% YoY/QoQ, a negative quarterly margin for the first time in a decade, owing to weak sales and higher discounts. So, Ebitdam fell 320bps YoY to 3%, leading to 57/74% decline in Ebitda/adjusted profit after tax respectively.

The company's UCP segment has already grown in Q3 and is expected to accelerate further. Voltas expects demand recovery in upcoming quarters, supported by channel restocking for summer, revised BEE norms, and the recent GST cut.

According to management, channel inventory is now near normal, with discounts expected to decline, going forward.

We maintain Add by valuing the company on SOTP basis (implying 40x Sep-27 EPS) to arrive at a target price of Rs 1,420/share.

Deepak Nitrite - Prioritizing market share over margin

We maintain SellL on Deepak Nitrite Ltd., with a price target of Rs 1,428. Deepak Nitrite is venturing into polycarbonate manufacturing with an investment of Rs 50 billion and expanding into polycarbonate compounding.

The PC plant shall commence operation by FY28-end and start contributing to revenue from FY29. Additionally, the company will invest Rs 35 billion for setting up a PC intermediate plant (Bisphenol A) and an additional phenol capacity.

However, the balance sheet will become debt-ridden (from being debt-free) with a peak net debt to equity of 0.92x and net debt to Ebitda of 2.8x in FY28.

The RoCE will remain ~9.7% over the next four years while RoE will remain below ~14.9% until FY29. The stock is currently trading at 43.8/28.9x FY26E/27E.

Ebitda/APAT were 4/7% above our estimates, owing to lower-than-expected raw material costs, employee costs, and other expenses while revenue was in line with the estimate.

Dilip Buildcon - Growth slows amid muted ordering

Dilip Buildcon Ltd. reported revenue/Ebitda/APAT beat/(miss) of -20.3/- 16.1/-67.8%. The Ebitda margin stood at 10.8% (+54.7-64.3bps YoY/QoQ), in line with our estimate of 10.2%. Dilip Buildcon has guided for FY26 revenue of Rs 80 billion, an Ebitda margin of 11%, and order inflow of Rs 150 billion.

Capex is expected to be minimal, focused mainly on replacement needs. With Rs 47 billion worth of order inflow in Q2 FY26, Dilip Buildcon FYTD order inflow stands at Rs 56.7 boillion vs the subdued order inflow of Q1 FY26 and FY25.

NHAI awarding is expected to pick up in Q4 FY26.

Dilip Buildcon has divested 26/24.99% equity stake in 8/3 hybrid annuity model projects to Alpha Alternatives (AA). The balance seven assets are under construction, and 26% stake will get divested post-PCOD.

From the combined AA/Shrem platform, Dilip Buildcon expects Rs 2.2/4.1/4.5/8.95 billion in cash/InvIT units by H2FY26/27/28/29-30.

Given the slower execution, project award delays, and postponement of net cash status to FY28, we have cut our FY26/27 EPS estimates.

We retain Add with an SOTPbased target price of Rs 519 (12x Sep-27E EPS, 0.7x P/BV HAM equity investment).

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