PL First Cut – Voltas Q2FY24

PL First Cut – Voltas Q2FY24 – Praveen Sahay – Research Analyst, Prabhudas Lilladher Pvt Ltd

Voltas Q2FY24 Result First Cut – Disappointing performance in seasonally weak quarter

(CMP: Rs839 | MCap: Rs 278bn | HOLD)

➡️ Revenues grew by 29.7% YoY to Rs22.9bn (PLe:Rs20.3bn), led by growth in Unitary Cooling Products (UCP) business (+15.4% YoY) and EMPS business (66.8% YoY).

➡️ Gross margins expanded by 10bps YoY to 24.5%. (PLe: 21.2%)

➡️ EBITDA declined by 30% YoY to Rs703mn (PLe:Rs1.2bn). EBITDA margin contracted by 260bps YoY to 3.1%. (PLe: 6%) vs cons est 6.7%, due to increase on overhead expenses as %rev. to 13.0% from 8.8% in Q2FY23.

➡️ PBT declined by ~21% YoY to Rs1.2bn (PLe:Rs1.6bn).

➡️ Adj. PAT declined by 63% YoY to Rs366.8bn (PLe:Rs918mn), 61% below our estimates.

➡️ VOLT’s share of loss from JV and associates stood at Rs332mn, vs our est. loss of Rs258mn.

➡️ UCP revenues grew by 15.4% YoY to Rs12.1bn (vs Lloyd +18.5% YoY), relatively performed better amid the erratic monsoon in a weak quarter. Voltas reported overall volume growth of 20% in UCP segment. EBIT grew by 20.5% YoY to Rs922mn and margins contracted by 30bps YoY to 7.6%.

➡️ Voltas continues to be the market leader and has sustained its leadership position in the overall RAC business with its exit market share at 19.5% in Aug-23 (v/s 20.6% in Jun-23).

➡️ EMPS revenues grew by 66.8% YoY to Rs9.2bn. Reported EBIT loss of Rs420mn vs EBIT loss of Rs 143mn in Q2FY23.

➡️ EMPS’s carry forward order book grew 45% YoY at Rs86.8bn, increased QoQ from Rs81.9bn in Q1FY24 (up 6% QoQ).

➡️ EPS revenues decline by 2.1% YoY to Rs1.3bn. EBIT grew by 12.3% YoY to Rs539mn and margin expanded by 510bps YoY to 40.1%.

➡️ The stock currently trades at 35/29 FY25/FY26 earnings.