Voltas Q4 Results Review - Market Share Volatility Continues; Valuations Appear Rich: Nirmal Bang

Nirmal Bang Report

Voltas Ltd. posted Q4 FY23 consolidated revenue of Rs 29.6 billion, up 10.9% YoY (three-year compound annual growth rate: 12.6%). The topline was in line with our/consensus estimates.

Unitary cooling product/electro-mechanical projects and services/engineering products’ revenue grew by 12.7%/7.8%/15.3% YoY to Rs 20.5 billion/Rs 7.5 billion/Rs 1.4 billion (69.8%/25.4%/4.8% of total sales).

Gross margin contracted by 120 bps YoY to 21.6%, mainly due to commodity cost pressures. Ebitda came in at Rs 2.2 billion, down 16.4% YoY. Ebitda margin contracted by 240 bps YoY to 7.4%, below our/consensus estimate of 8.7%/8.2%. Ebit margin for the UCP segment declined by 60 bps YoY to 10%. EMPS segment’s Ebit margin came in at (-)1.9% versus 6.9% in Q4 FY22.

Adjusted profit after tax declined by 21.2% YoY to Rs 1.4 billion, below our/consensus estimate by 13.1%/13.3%.

Voltas has also decided to mutually terminate its joint venture with highly international (which it formed to manufacture inverter compressor).

Further, the company’s Board has approved internal restructuring of the international operations, including investments in overseas joint ventures/subsidiaries, to be housed in a wholly-owned subsidiary to enhance focus on product business as well as project business independently.

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