An employee inserts a screw on an air conditioner cabinet. (Photographer: Udit Kulshrestha/Bloomberg) 

Brokerages Maintain Stance On Voltas Ahead Of Festive Season

Most brokerages maintained their stance on Voltas Ltd., after the company announced that it would launch refrigerator and washing machines by early 2018

The air conditioner manufacturer's August sales rose driven by the uncertainty surrounding the Goods and Services Tax (GST), Voltas management said in an analysts meet that concluded on Thursday.

Here’s what brokerages had to say on Voltas, post its management meeting:

Bank of America Merrill Lynch

  • Stock Rating: Maintained ‘Neutral’
  • Strong festive sales/Q1CY17 key to upside
  • Channel inventory for air-conditioners (ACs) are still below normal
  • Upcoming festive season in October could kick-start restocking by dealers
  • Festive sales in October and pre-season buying in February and March 2018 would be key factors to watch
  • Expect a lean Q2 with a likely surprise from H2 onwards channel re-stocks ACs and execution of recently won relatively-high-margin Rs 490 crore electrification order begins and aids in MEP revenue growth/margin expansion
  • We build-in a 6.3 percent and 6.8 percent EBIT margin for the MEP segment in FY19 estimates and FY20 estimates, respectively
  • UCP likely to maintain margins

Deutsche Bank

  • Stock Rating: Maintain ‘Sell’
  • Target Price: Unchanged at Rs 400
  • Expect margin compression due to expiry of excise duty benefits in March 2018 and pricing disruption with new energy efficiency norms
  • Higher marketing expenses will likely be required in Q4 on the launch of the Voltas-Beko brand
  • Industry growth has been weak, and dealer feedback suggests slow restocking and also due to about 30 percent efficiency improvement in logistics
  • Expect industry growth to be flat to marginally positive in FY18
  • Implied AC business Price-to-earnings (P/E) is high at 45/40 times for FY18/19 estimates, considering a 15 time P/E for Engineering and Projects business.
  • Project the proportion of UCP to reduce to about 60 percent in two years, from 86 percent in Q1FY17
  • Do not expect a strong festive season due to a large base effect and pre-buying in June ahead of the festive season.


  • Stock Rating: Maintained ‘Buy’
  • Target Price: Hiked to Rs 660 from Rs 635
  • Increase EPS estimates marginally and maintain Voltas as our top mid-cap pick
  • Voltas-Arcelik JV could be a key driver of earnings in long term
  • Continue to value Voltas at 30 times FY19 estimates P/E