Business

Voltas Rating: buy- Results were well ahead of estimates

Overall, we raise revenue estimates by +4%/9%/13% and EPS by ~9-10% for FY21-23F.Overall, we increase income estimates by +4%/9%/13% and EPS by ~9-10% for FY21-23F.

VOLT’s Q3FY21 income/Ebitda at Rs 20/1.5 bn got here in considerably ahead of our forecasts (Rs 17/1.1 bn) and Bloomberg consensus (Rs 16.6/1.1 bn). AC enterprise was sturdy with income progress/Ebit margin at 40% y-y/12.5%, well ahead of friends. VOLT’s share remained steady at 26% in 9MFY21 (24.2% in FY20) whereas it achieved management in inverter ACs with 21.8% share in Dec 2020. The undertaking enterprise reported 26% y-y income progress (Ebit margin 3.2%) and order e-book elevated additional to Rs 72.5 bn.

Management commentary: Healthy momentum continued in ACs in This autumn, and value hikes of 5-6% in Jan 2021 are enough to guard margins. Beko billing factors elevated to 1000+ and there may be vital demand pull from commerce.

Production linked incentive (PLI) scheme envisages incremental manufacturing of Rs 1.7 trn and Rs 644 bn of exports, primarily ACs, over a five-year interval with 4-6% incentive. This can help VOLT’s Ebit by >7% and has sturdy potential for exports for ACs from India, as well. For VOLT’s room AC enterprise, we now forecast income to say no 12% y-o-y in FY21F (-16% earlier) and preserve 53%/20% y-o-y progress for FY22/23F. Overall, we increase income estimates by +4%/9%/13% and EPS by ~9-10% for FY21-23F.

Valuation: SOTP-based TP of Rs 1,274 (Rs 1,110 earlier)— We increase our goal PE for the UCP enterprise to 50x (45x earlier), led by market-share beneficial properties and upside potential from the PLI scheme. We preserve 13x/15x goal P/E for undertaking/service enterprise and Rs 127 for VoltBek (primarily based on DCF). The inventory is at the moment buying and selling at 30.5x FY23F EPS (adjusted for Beko), which in our view is engaging. Reiterate Buy.

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