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Outlook Shared By Voltas - No Change in FY12E Earnings
December 2010- Business Outlook shared by Voltas has flagged few areas of concerns in business operations like (1) lower execution in projects business (2) draw down in volume growth rates in unitary cooling business and (3) company-wide experience of adverse currency movement and higher material cost pressure. Our earnings forecasts had partially factored for short-term changes in business operations like (1) lower operating margins, driven by high base (factored 30 bps reduction in operating margins in FY11E) and (2) realistic growth assumption in Unitary Cooling Products business at 20% for FY11E. Hence, our earnings forecasts were 4% and 6% lower then consensus for FY11E and FY12E at Rs11.3/Share and Rs13.3/Share respectively. Also, implied earnings growth for H2FY11E is pegged at 10% - which in worst case would come down to no growth owing to lesser execution in H2FY11E. This would translate into 4% downgrade in FY11E earnings to Rs10.9/Share and no change in FY12E earnings. We remain unpreturbed by the business outlook given by Voltas management - since our earnings forecasts were always realistic and lower then conesus for FY11E and FY12E. We retain our BUY rating with target price of Rs275/Share.
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