Voltas Q4 Review - Headwinds In Projects Business To Recede, RAC To Outshine; Upgrade To Add: Yes Securities

Yes Securities Report

Voltas Ltd. has delivered better than expected revenue growth with unitary cooling product growing by 44% (higher than peers like Blue Star Ltd. and Lloyd) and EMPS segment growing 47% on improved execution as order backlog continues to be robust.

Voltas has outperformed industry in terms of revenue growth in UCP. It’s year-to-date market share of 18.7% is expected to improve in Q1 as secondary sales will be higher in Q1 and will track primary sales. Room AC margins at 10% continues to remain leading margins, segment margins are lower as commercial Ac and refrigeration margins were impacted on higher raw material prices.

Volt‐Bek continues to see strong traction with washing machine and refrigerator market share standing at ~8% and 4% respectively. The projects business continues to be marred by provisioning related to international geography (QATAR) arising out of delay in collections and costs overrun.

The company has provided for most of the cost overruns and FY25 will start on clean slate. On the positive side order book continues to remain robust.

We now become positive on the stock and upgrade he stock to Add rating as-

1. Company will focus on volumes with margins at ~10%,

2. Provisioning in project business is largely done with and robust order‐ book tilted towards domestic projects will give and edge;

3. Volt‐bek to continue with strong revenue growth and

4. Commissioning of new plant for RAC and commercial AC will aid in increased efficiency.

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