Q2FY20 result highlights
Conf call highlights: (1) Low base & decent Onam sales led to 19%/ 33% industry growth (secondary) in 2QFY20/ YTD FY20 with traction towards inverter sales (2) Voltas’ 19% yoy growth was led by invertor ACs (now 50% of split AC; sustained competition with lower inverter prices), new product launches such as adjustable inverter AC & flexible AC (3) Maintain UCPL margin guidance of 11-12% on sustainable basis; (4) EESL order in Delhi (order for 50K units; 1K delivered) and Tata Power scheme in Mumbai to ramp up gradually (5) UCPL touchpoints at 19k vs 15-16k (~1 year ago) (6) Strong intake momentum to continue in 3Q20 led by wins (L1) in metro, water, etc; (6) Qatar order win in 2Q20 is driven by ease of project execution as also limited complexity, which is likely to drive timely completion; (7) VoltBek JV continues focus on increasing distribution (150 excl outlets); plant to be opnl by 3Q20 end.
Impact on financials: FY20/21 unchanged at Rs17.4/21.7
Valuations & view
After a weak FY19, demand has bounced sharply in 1HFY20, which Voltas has been able to leverage with market share gains despite competitive intensity. Accordingly, we believe demand and thereby margins are likely to rebound over FY20-21 led by Voltas’ scale and cost efficiencies. Concurrently, recent order wins in EMP provides visibility to uptick in revenues with stable margins. Hence, we believe valuations at 31x FY21E earnings are attractive considering the long term structural story on RAC, free cash generation and strong balance sheet. Maintain 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.
IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.