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Voltas -Banking stronger summer season AC sales recovery
„Maintain Buy on AC sales & Mid East recovery, PO down 19%
Voltas recurring net profit at Rs534mn declined 20% y-o-y and is 30% below
estimate. Loss in the electrical construction project being executed by subsidiary
company Rohini and inventory correction in room AC led to earning miss. We
have cut earnings and hence PO by 19% to Rs220. We have maintained Buy as
we expect growth in earnings to recover from Q4FY11 driven by stronger summer
season AC sales and rise in Middle East project revenue.
Earnings estimate cut on Q3FY11 miss and margin pressure
We have cut FY11e FY11e EPS by 8% and FY12/13e EPS by 12% on weaker
margin outlook due rising copper price and competition. We now expect the
company to have EBITDA margin of 8.7% in FY11e and 8.5% in FY12e compared
to 9.6% in FY10.
Recovery in earnings compared to low base of Q3 imminent
We expect EBITDA margin, sales growth to bounce back from Q4FY11e
compared to Q3FY11 in which EBITDA margin touch a low of 7.6% and sales
grew only 5% y-o-y. Reduction in loss in Rohini coupled with rise in summer
season AC demand as well as pace of MEP execution in Middle East likely to
drive recovery.
Key risk is further slowdown in consumer demand for AC
Our PO is based on PE of 16x FY12e and Rs15/sh as value of investments and
real estates owned by Voltas. Key risk to our assumption of stock re-rating
from13.5X FY12e is sharp slow down in AC sales owing to rising interest rate.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Voltas -Banking stronger summer season AC sales recovery
„Maintain Buy on AC sales & Mid East recovery, PO down 19%
Voltas recurring net profit at Rs534mn declined 20% y-o-y and is 30% below
estimate. Loss in the electrical construction project being executed by subsidiary
company Rohini and inventory correction in room AC led to earning miss. We
have cut earnings and hence PO by 19% to Rs220. We have maintained Buy as
we expect growth in earnings to recover from Q4FY11 driven by stronger summer
season AC sales and rise in Middle East project revenue.
Earnings estimate cut on Q3FY11 miss and margin pressure
We have cut FY11e FY11e EPS by 8% and FY12/13e EPS by 12% on weaker
margin outlook due rising copper price and competition. We now expect the
company to have EBITDA margin of 8.7% in FY11e and 8.5% in FY12e compared
to 9.6% in FY10.
Recovery in earnings compared to low base of Q3 imminent
We expect EBITDA margin, sales growth to bounce back from Q4FY11e
compared to Q3FY11 in which EBITDA margin touch a low of 7.6% and sales
grew only 5% y-o-y. Reduction in loss in Rohini coupled with rise in summer
season AC demand as well as pace of MEP execution in Middle East likely to
drive recovery.
Key risk is further slowdown in consumer demand for AC
Our PO is based on PE of 16x FY12e and Rs15/sh as value of investments and
real estates owned by Voltas. Key risk to our assumption of stock re-rating
from13.5X FY12e is sharp slow down in AC sales owing to rising interest rate.
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