EUR 120.00 For Business Accounts Only

MOSL: Morning India (09/August/19): 1. Voltas (Defies slowdown; Raise earnings; Upgrade to BUY); 2. EcoScope; 3. UltraTech Cement; 4. Petronet LNG; 5. Lupin; 6. Aurobindo Pharma; 7. Page Industries; 8. Ashok Le

MOrning India (09/August/19): 1. Voltas (Defies slowdown; Raise earnings; Upgrade to BUY); 2. EcoScope; 3. UltraTech Cement; 4. Petronet LNG; 5. Lupin; 6. Aurobindo Pharma; 7. Page Industries; 8. Ashok Leyland; 9. Cummins India; 10. The Ramco Cement

 

Today’s top research Idea

Voltas: Defies slowdown; Raise earnings; Upgrade to BUY

• revenue increased 24% YoY in 1QFY20, exceeding our estimate by 11%, led by strong 47% growth in UCP segment. As a result of a higher effective tax rate (32% v/s our estimate of 27%) and higher losses in JVs, net profit increased at relatively low rate of 6% YoY to INR1.9b (in-line).
• According to management, industry growth stood at 36% for the quarter. Against the backdrop of slowing consumption in the economy, this validates that the strong summers is the primary driver for AC purchases.
• With lower-than-expected channel inventory, we do see some scope for price hikes to offset the import duty pressure. However, this is not our base-case scenario, as competitors can still be irrational and operate at lower-than-optimal margins in a hunt for market share.
• We raise our adj. consol. earnings estimate by 2%/6% for FY20/21, led entirely by UCP segment. We continue valuing UCP at a target multiple of 35x FY21E EPS. Our TP now stands at INR700. At CMP, the stock trades at multiple of 28x for core UCP business. We upgrade the stock to Buy.