Demand for room AC has started strong in the ongoing summer season of CY25, and the current inventory, along with the tie-up for compressors, will support Voltas' growth in Q4 FY25. The competition is projecting ~30% YoY growth in Q4, and the company aims to outperform its peers.
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Motilal Oswal Report
We interacted with the management of Voltas Ltd. to gain insights into current demand trends, as well as its views on compressors, margins, market share, and more. Management believes that current demand trends for room AC remain strong, and its focus will be on growing faster than its peers.
While market share will be prioritized over margins, it aims to increase value engineering to save costs and protect margins, rather than opting for price hikes, which could impact margins. The government has relaxed import norms for compressors above 2 tons (~10% of the industry's volumes) and the industry is awaiting approvals for compressors below 2 tons.
We expect Voltas to benefit from a strong start to the summer season and anticipate the unitary cooling product segment's margin to be ~7.5% in Q4 FY24. We reiterate Buy on the stock with a target price of 1,710 based on SOTP.
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