MOSL: VOLTAS (Neutral)-Sales, EBITDA exceed estimate-Projects biz shines
Voltas: Sales, EBITDA exceed estimate; Projects biz shines
(VOLT IN, Mkt Cap USD3.0b, CMP INR620, TP INR590, 5% Downside, Neutral)
- A beat on sales and EBITDA: Sales of INR20.5b (+11% YoY) were above our estimate of INR19.9b. EBITDA rose 17% YoY to INR2.4b (our estimate: INR2.3b), with the margin at 11.3% (+60bp YoY) v/s our estimate of 11.5%. PAT of INR1.8b (flat YoY) was lower than our estimate of INR2.0b on account of lower other income (INR282m v/s our estimate of INR500m).
- UCP sales decline 2% YoY, EBIT margin at 12.4%: UCP sales declined 2% YoY to INR11.9b due to unseasonal rains across the northern and southern markets. Market share stood at 23.5% (+130bp YoY and +70bp QoQ). Secondary sales for the industry declined 11% YoY; VOLT too showed de-growth but performed better than industry. Note that 1QFY18 secondary sales were positively impacted by GST-related stock clearance, while 1QFY19 sales were adversely impacted by unseasonal rain. UCP margin shrank 160bp YoY to 12.4% in 1QFY19 on account of intense competition, resultant pricing pressure and INR depreciation. Capital employed in the segment increased to INR1.9b v/s INR0.5b in 1QFY18 due to higher inventory.
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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