Hold Voltas; target of Rs 609: Prabhudas Lilladher

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Prabhudas Lilladher's research report on Voltas

Voltas Analyst meet indicated cautious demand scenario post positive start to UCP in FY20 as continuing slowdown in the economy can negatively impact festive season sales. The management has maintained annual margin guidance of 11% in UCP. With no presence in key product segments (Direct Cool refrigerator & Semi-automatic Washing Machines) Voltbek is unlikely to make any major inroads this festival season. It is expected to remain in an investment phase over the next 3-4 years given expenses on distribution, branding and stiff competition in white goods market. We estimate the JV to report loss of ~Rs1.5bn/Rs1.2bn in FY20/21. MEP business is focusing on domestic projects in Rural Electrification and Urban Infra as return of NDA Govt is likely to retain continuity in policies.

Outlook

We estimate 14.5% EPS CAGR over FY19-21 and value the stock at 28x June21 EPS. Maintain Hold with a target price of Rs609.

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