MOSL: VOLTAS (Neutral)-Underperformance on most fronts-UCP reeling under cost pressure
Voltas: Underperformance on most fronts; UCP reeling under cost pressure, significant losses at BEKO JV
(VOLT IN, Mkt Cap USD2.4b, CMP INR523, TP INR535, 2% Upside, Neutral)
- Below expectation at operating level: Sales grew 9% YoY to INR14.8b, marginally below our estimate of INR15.4b, impacted by lower EMP sales (INR8.7b v/s our estimate of INR9.2b). EBITDA declined 3% YoY to INR1.2b (our estimate: INR1.3b), with the margin of 7.8% (-80bp YoY) missing our estimate of 8.2% due to weak UCP margins. Adj. PAT declined 8% YoY to INR0.9b, below our estimate of INR1b. VOLT booked a loss of INR308m pertaining to its JV business with BEKO.
- UCP - sales down 3% YoY, EBIT margin shrinks 450bp YoY: UCP sales declined 3% YoY to INR5.2b (in-line). The segmental margin shrank 450bp YoY to 8.5% (our estimate: 9.3%) on account of the company's inability to take price hikes, despite a rise in RM cost and INR depreciation. Capital employed in the segment increased to INR7.8b from INR2.7b in 3QFY18 on account of higher inventory in the system. VOLT plans to set up a manufacturing facility in Sricity (expected to be ready by 2HFY20) with a total capex of INR5b, through which it would cater to the south and west markets. VOLT's UCP market share stood at 24% for 9MFY19.
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.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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