Voltas Ltd Research Report - 24th May 2016

Capital Goods | Published on May 24th 2016


Voltas reported a strong set of numbers for 4QFY2016. The top-line at Rs1,876cr is up 26.4% yoy and is higher than our expectation, mainly driven by strong execution across the EMP segment. The EMP segment impressed us with a 36.5% yoy increase in revenue to Rs819cr (accounting for 44% of the company’s overall 4QFY2016 revenues), whereas the UCP segment’s revenue at Rs859cr is almost in-line with our estimate. The EBITDA margin for the quarter was flat yoy at 9.2%. Notably, with most of the legacy projects nearing completion, the EMP segment reported a strong EBIT margin of 3.4%, as against a loss and 0.7% margin in the corresponding quarter of the previous year. Better than expected execution coupled with higher other income helped the company report a PAT of Rs176cr, which is up 49.5% on a yoy basis. On adjusting for exceptional items, the PAT stood at Rs149cr, reporting a sharp increase of 27.1% yoy. The Adj. PAT margin for the quarter stood at 7.9%, which is the same as in the corresponding quarter a year ago. Another positive is the company announcing order inflow of Rs959cr for the quarter. The order book for the EMP segment as of 4QFY2016-end stands at Rs3,914cr (order book [OB] to LTM ratio of 1.4x). A report by GFK Nielsen states towards Voltas having retained its top slot in the domestic AC sales market in FY2016. Valuation: We expect Voltas to report a strong 13.3% top-line and 18.1% bottom-line CAGR during FY2016-18E, respectively. On considering the case for improvement in all of its business segments’ performances, we expect improved profitability and better investment return ratios for the company, going forward. We now assign Voltas a 25.0x PE multiple to our FY2018E EPS estimate of Rs16.3/share and arrive at a price target of Rs407. This reflects 24% upside potential from the stock’s current market price. Accordingly, we continue to maintain our BUY rating on the stock.

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CMP 328
Target Price 407
Investment Period12 Months

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Shareholding Pattern (%)

Public & Others20.0
Grand Total100.0

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