Add Voltas, target price Rs 1150: HDFC Securities

HDFC Securities has add call on Voltas with a target price of Rs 1150. The current market price of Voltas Ltd. is Rs 986.2. Time period given by analyst is one year when Voltas Ltd. price can reach defined target.

Voltas Ltd., incorporated in the year 1954, is a Large Cap company (having a market cap of Rs 32901.52 Crore) operating in Consumer Durables sector.

Voltas Ltd. key Products/Revenue Segments include Electrical Goods, Contract Revenue, Sale of services, Other Operating Revenue and Scrap for the year ending 31-Mar-2021.


Financials
For the quarter ended 31-03-2022, the company reported a Consolidated Total Income of Rs 2703.78 Crore, up 48.37 % from last quarter Total Income of Rs 1822.34 Crore and up .77 % from last year same quarter Total Income of Rs 2683.24 Crore. Company reported net profit after tax of Rs 211.56 Crore in latest quarter.

Investment Rationale
Voltas Q4 performance was quite unique; in a strong onset of summer, the market leader lost market share in room air conditioner (RAC) category. The industry is witnessing robust demand after the slump of the last two summer seasons, while many markets and brands are witnessing a stock-out situation. Voltas lost market share (>200bps on YTD to 23.4%), primarily in south market (typically contributes ~20% but higher contribution for Q4). Voltas lost market share to LG and Samsung due to lower price gap and to Lloyd due to aggressive pricing. The brokerage believes the road is not an easy one for company in regaining its full share, although some recoup is expected owing to corrective price action and strong demand in the core market. Despite this blip in Q4 performance, the brokerage is confident on the company’s execution capabilities (demonstrated in the past several years) while we will keep monitoring the market share status in the remaining season. Voltas is expected to sacrifice margin over growth; hence, it cuts EPS estimate by 4% for FY23/FY24. We remain bullish on Voltas for being a market leader in the promising RAC category. It cuts UCP multiple to 45x vs. 50x earlier on FY24 EPS. It values the stock on SoTP (UCP/EMPS/EPS P/E at 45/9/15x and Volt-Beko P/S of 4x) on FY24 to derive a TP of INR 1,150.

Promoter/FII Holdings
Promoters held 30.3 per cent stake in the company as of 31-Mar-2022, while FIIs owned 26.19 per cent, DIIs 27.84 per cent.