MOSL: VOLTAS (Neutral)-Disappointing results; outlook remains cautious; Upcoming festive season key for RAC offtake
VOLTAS: Disappointing results; outlook remains cautious; Upcoming festive season key for RAC offtake
(VOLT IN, Mkt Cap USD4.6b, CMP INR1025, TP INR1065, 4% Upside, Neutral)
- Voltas (VOLT) reported a weak set of earnings, with revenue/EBITDA miss of 9%/27%. The strong show in the Electromechanical Projects (EMP) segment failed to offset the weakness in the Unitary Cooling Products (UCP) segment.
- The ordering intake/outlook for the Projects business remained subdued with clients delaying their capex spends. AC sales volumes may fall short of FY20 levels, with no sign of pent-up demand this time around during a lean summer. However, this would still mean some growth in YoY terms. On a positive note, unlike last time, channel inventory is not high, although brands have higher inventory this time around.
- We cut our FY22/FY23/FY24 EPS estimate by 8%/3%/4%. Our new TP stands at INR1,065 as we roll forward to Sep’23 EPS (target multiple of 45x to the UCP segment v/s 50x earlier – to account for segmental reclassification). At CMP, the UCP business is trading at an FY23E/FY24E PE multiple of 46x/40x. Maintain Neutral.
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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