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Voltas shares will be reacting to their first quarter earnings on Monday, August 17. The numbers were reported after market hours last Friday.
During the June quarter, the company's revenue increased by 19%, which turned out to be lower than the CNBC-TV18 poll of 28% growth. The miss was led by its electro-mechanical projects (EMP) business.
EBITDA margin though, expanded by 120 basis points from last year to 5.7%, but turned out to be below street estimates of 6.3%.
Voltas said it aspired to improve margins towards the 7%-plus level over the long term, and expects a recovery to begin from the third or the fourth quarter of the current financial year.
The company's key unitary cooling products (UCP) business performance was in-line with expectations, with its revenue increasing by 32% from last year and margins rising 170 basis points to 5.3% from the year-ago period.
Profit after tax for the period went up by 52% to ₹213 crore from ₹140 crore last fiscal but it was lower than street estimates of ₹217 crore.
Should You Buy Or Sell Voltas?
Brokerages were also mixed on the stock, with Citi and UBS having "buy" ratings, while CLSA and Nomura having "underperform" and "neutral" recommendations, respectively.
Citi
The brokerage has a "buy" rating and a target of ₹1,550 per share, indicating an upside of 17.2% from its previous close.
It said that amid heightened competitive intensity and cost pressure, room air conditioner (RAC) volume grew 45% from last year, leading to 17.3% secondary market share so far this fiscal.
Voltas has also inked a joint venture agreement with Atomberg Innovation to develop and manufacture high-efficiency RAC compressors in India.
The management highlighted that of the total 10% - 12% cost increase, Voltas has already passed on most of it and may reduce some channel schemes to improve margins, Citi said.
UBS
UBS too has a "buy" rating on Voltas with a target of ₹1,560 per share, indicating an upside of 18% from its previous close.
It said the company's revenue and EBITDA missed UBS estimates by 10% while its profit after tax (PAT) beat estimates by 4% on higher other income.
The brokerage said that on the UCP margins, the Voltas management has highlighted improvement despite industry-wide cost inflation, aided by price hikes, scale benefits and cost savings and it target a gradual return to 7% margins, though commodity costs remain a near-term headwind.
In the mechanical electrical and plumbing (MEP) business, domestic ordering remained healthy across industrial infrastructure, electonrics manufacturing, metros, turnkey projects and data centres, while the management is consciously shifting towards faster-generation, value-accretive private sector MEP projects with better cash flows, UBS said.
It added that the Voltas JV with Atomberg is targeting capacity of 2.8 million units. In Voltas Beko, the FY27 EBITDA breakeven may slip by a few quarters due to commodity inflation, it said.
CLSA
The brokerage has an "underperform" rating on Voltas with a target of ₹1,160 per share, indicating a downside of 12.3% from its previous closing price.
It said the first quarter EBITDA was largely in-line with estimates with strong industry-leading growth in RAC. Its margins were low despite strong volume growth and price increases, it said.
While the Street is likely to take robust growth numbers positively, low growth in projects and margin concerns remain, CLSA added.
Nomura
The brokerage has a "neutral" rating and a price target of ₹1,357 per share, indicating an upside of 2.6% from its previous close.
It added that high competition would delay margin recovery.
Nomura has maintained 25% and 15% AC industry volume growth estimates for FY27 and FY28, respectively, with UCP revenue growing 29% and 22% each.
However, the focus on market share over profitability will keep margin recovery slower, Nomura said.
It added that the compressore JV localization execution will remain in key monitorable for meaininful benefits longer term.
Stock reaction
Of the 40 analysts who have coverage on the Voltas stock, 15 have a "buy" rating, 16 have a "hold" rating and nine have a "sell" rating.
Voltas shares ended the previous session 2.5% higher at 1,322 apiece. The stock has declined 1.5% in the past month and is down 4.5% this year, so far.
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