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Motilal Oswal Report
Voltas Ltd.'s Q2 FY22 revenue stood in line with our estimates, with strong performance by the unitary cooling products segment, offsetting the weak performance in the electro-mechanical projects and services segment.
Adjusted profit after tax came in 23% ahead of our estimate.
Despite a 24% volume growth in the UCP segment (room air conditioner: up 19% YoY), it witnessed a 130 basis points decline in profit before tax margin.
As Voltas had the advantage of low cost inventory as well as strong operating leverage due to volume growth, the margin contraction indicates higher competitive intensity in the air conditioner segment.
The management raised prices by 3-5% in October 2021, but needs to take further hikes to offset margin pressures.
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