We met Voltas’ management; below are key takeaways:
Valuations and view
Overall, Voltas has seen strong performance in UCPL led by strong summers and market share gains (24% in FY19 vs 22% in FY18). We believe the positive operating leverage and price hikes would drive margins (our est of 11.8% in FY20), while EMP would see steady growth. Sustained focus on brand, reach and product (adjustable inverter) continues to drive market share traction. While the JV is progressing well, the losses are likely to be higher than estimated in FY21 (cut of 3-5% in earnings). We believe the stock looks attractive at 29x FY21E earnings, considering the long-term structural story on room air conditioners (RAC), free cash generation and strong balance sheet. Outperformer.
Voltas is an air conditioning company based in India. Co. offers engineering solutions for industries in areas such as heating, ventilation and air conditioning, refrigeration, electro-mechanical projects, textile machinery, mining and construction equipment, water management & treatment, cold chain solutions, building management systems, and indoor air quality. Co. is principally active in the management and execution of electro-mechanical projects and the installation and servicing of diverse technology-based systems. Co.'s operations are organized along three business segments: Electro-Mechanical Projects & Services; Engineering Products & Services; and Unitary Cooling Products.
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