MOSL: Morning India (16/December/19): 1. Voltas (RAC thriving in spite of intense competition); 2. IndusInd Bank; 3. Financials – NBFC; 4. Fund Folio; 5. EcoScope
MOrning India (16/December/19): 1. Voltas (RAC thriving in spite of intense competition); 2. IndusInd Bank; 3. Financials – NBFC; 4. Fund Folio; 5. EcoScope
Today’s top research idea
Voltas: RAC thriving in spite of intense competition;
- According to Voltas' (VOLT) management, the company is benefiting from the fallout in the US-China trade war. Due to high inventory build-up in China, VOLT was able to avail high discounts, which more than offset the import duty increase.
- In the room AC business, VOLT has grown by 42% in 1HFY20 v/s industry's secondary sales growth of 33%. We have built in 13.8% growth in the UCP segment for 2HFY20, led by (a) our expectation of inventory build-up at dealer level going into the summer season, and (b) the favourable base for the next two quarters.
- In the EMP business, VOLT expects strong order wins in 3QFY20 from the water segment and metro/airports. Working capital continues to be stretched but has eased compared to three months ago.
We value VOLT on an SOTP basis with a target price of INR785 (UCP business at 35x Sep'21E EPS; EMP and Engineered Products business at 15x Sep'21E EPS). Maintain Buy.
Piping hot news
ArcelorMittal initiates Rs 42,000 cr payment for Essar Steel acquisition
Global steel giant ArcelorMittal has initiated payment for acquisition of debt-ridden Essar Steel for Rs 42,000 crore, sources said on Friday. The decks for acquisition of Essar Steel by L N Mittal-led company was cleared by the Supreme Court last month.
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