Voltas Shares Soar To Record, UBS Upgrades Stock To 'Buy'

The stock rose as much 7.26% during the day to Rs 1,395 apiece on the NSE.

<div class="paragraphs"><p>Image used for representational purpose (Source: Voltas website)</p></div>
Image used for representational purpose (Source: Voltas website)

Shares of Voltas Ltd. hit an all-time high on Monday after UBS Global Research upgraded the stock to 'buy' from 'neutral' as the brokerage sees it gaining further market share in the room air-conditioning space. It raised the household appliances maker's target price from Rs 885 to Rs 1,800 apiece, implying a potential upside of 38.4% from the previous close.

Voltas is likely to surprise in market share with a possible turnaround in the bottom line by financial year 2026. In the room air-conditioning space, its market share may reach 23% by that fiscal, according to a note.

The air conditioner maker has reworked its supply chain and reduced cost, which will make it hard for peers to match its offerings, leading to potential market-share gains, the brokerage said.

VoltBek, a joint venture, has made progress in gaining market share and helped the company to narrow the gap with its peers in the industry. In certain categories like semi-automatic washing machines, VoltBek has already gained a 10% market share. The joint venture will continue to increase its market share, ultimately moving towards an Ebitda-positive position. UBS expects VoltBek to reach a 7.9% market share by fiscal 2027.

The worst is over for the industry, and it is expected to enter a stage of consolidation, UBS said. "The industry will reach equilibrium capacity utilisation by FY25E with a 15% CAGR in demand over FY23."

Earlier, the industry was weighed down by excess capacities, outsourced manufacturing, under-penetration-driven long-term growth potential resulted in crowding in the room air-conditioning space. These translated into a fall in profitability. As Voltas was the worst hit by the crowding in the space, it will now likely benefit the most from this consolidation.

Key Takeaways

  • Voltas RAC and VoltBek JV are improving market share and profitability, the brokerage said.

  • JV with Beko is expected to break even by fiscal 2026.

  • UBS expects incremental revenue of Rs 100 billion in the consumer electronics segment by fiscal 2027.

  • Values cooling segment at 55 times the earnings vs 35 times earlier.

  • VoltBek JV at four times the price to sales vs three times earlier, factoring faster scale-up.

Voltas Records 'Highest-Ever' AC Sales By Any Brand In A Fiscal In India
Voltas Shares Soar To Record, UBS Upgrades Stock To 'Buy'

Voltas' stock rose as much 7.26% during the day to Rs 1,395 apiece on the NSE. It was trading 6.49% higher at Rs 1,385 per share, compared to a 0.56% advance in the benchmark Nifty 50 at 1:22 p.m.

The share price has risen 63.32% in the last 12 months and 41.94% on a year-to-date basis. The total traded volume so far in the day stood at 5.2 times its 30-day average. The relative strength index was at 76.69, implying that the stock maybe overbought.

Nineteen out of 43 analysts tracking the company have a 'buy' rating on the stock, 15 recommend 'hold' and nine suggest 'sell', according to Bloomberg data. The average of 12-month analyst price targets implies a potential downside of 14.9%.

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