Target: ₹1,005
CMP: ₹873.80
We attended Voltas’ virtual call with analyst/investors. The management said that as per the GfK data, Voltas’ volume market share for January 2023 (lean period) was 19 per cent — a negative surprise, but not a material development in our view.
In February, Voltas saw a strong uptick in primary sales due to the ongoing heatwave, with temperatures being 1-2 degree Celsius higher than those of last year.
The management expects secondary sales to kick in from April and sees industry witnessing volume growth of 10 per cent in FY24. Voltas does not intend to take price hikes till April at least. It is ready for heightened competition as the top seven brands aim to gain volume market share.
The management said its entire project business runs on bank guarantees, which is an industry-wide phenomenon, and the last two quarters were the first instances when it saw an encashment of bank guarantee. Though Voltas has taken steps to ensure the reversal of provisions, this may not happen by March 2023, said the management.
The stock trades at FY24/FY25 P/E of 42x/33x vs its six-year NTM average of 49x, providing us valuation comfort.