Voltas Shares Soar To Record, UBS Upgrades Stock To 'Buy'
The stock rose as much 7.26% during the day to Rs 1,395 apiece on the NSE.
Shares of Voltas Ltd. hit an all-time high on Monday after UBS Global Research upgraded the stock to 'buy' from 'neutral' as the brokerage sees it gaining further market share in the room air-conditioning space. It raised the household appliances maker's target price from Rs 885 to Rs 1,800 apiece, implying a potential upside of 38.4% from the previous close.
Voltas is likely to surprise in market share with a possible turnaround in the bottom line by financial year 2026. In the room air-conditioning space, its market share may reach 23% by that fiscal, according to a note.
The air conditioner maker has reworked its supply chain and reduced cost, which will make it hard for peers to match its offerings, leading to potential market-share gains, the brokerage said.
VoltBek, a joint venture, has made progress in gaining market share and helped the company to narrow the gap with its peers in the industry. In certain categories like semi-automatic washing machines, VoltBek has already gained a 10% market share. The joint venture will continue to increase its market share, ultimately moving towards an Ebitda-positive position. UBS expects VoltBek to reach a 7.9% market share by fiscal 2027.
The worst is over for the industry, and it is expected to enter a stage of consolidation, UBS said. "The industry will reach equilibrium capacity utilisation by FY25E with a 15% CAGR in demand over FY23."
Earlier, the industry was weighed down by excess capacities, outsourced manufacturing, under-penetration-driven long-term growth potential resulted in crowding in the room air-conditioning space. These translated into a fall in profitability. As Voltas was the worst hit by the crowding in the space, it will now likely benefit the most from this consolidation.
Key Takeaways
Voltas RAC and VoltBek JV are improving market share and profitability, the brokerage said.
JV with Beko is expected to break even by fiscal 2026.
UBS expects incremental revenue of Rs 100 billion in the consumer electronics segment by fiscal 2027.
Values cooling segment at 55 times the earnings vs 35 times earlier.
VoltBek JV at four times the price to sales vs three times earlier, factoring faster scale-up.
Voltas' stock rose as much 7.26% during the day to Rs 1,395 apiece on the NSE. It was trading 6.49% higher at Rs 1,385 per share, compared to a 0.56% advance in the benchmark Nifty 50 at 1:22 p.m.
The share price has risen 63.32% in the last 12 months and 41.94% on a year-to-date basis. The total traded volume so far in the day stood at 5.2 times its 30-day average. The relative strength index was at 76.69, implying that the stock maybe overbought.
Nineteen out of 43 analysts tracking the company have a 'buy' rating on the stock, 15 recommend 'hold' and nine suggest 'sell', according to Bloomberg data. The average of 12-month analyst price targets implies a potential downside of 14.9%.