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3QFY11 results
Adjusted for exceptional income, Voltas’ 3QFY11 net profit fell 13% YoY
and came 10% below our expectations. EMP business disappointed, with
revenues falling by 3% YoY and Ebit margins contracting by 260bps.
Unitary Cooling and Engineering Products businesses, however,
continued to record robust revenue and earnings growth. We cut our
FY11-13 EPS estimates by 6-10% to reflect lengthening execution cycle
and rising material costs. The stock should still yield 20% EPS Cagr over
FY11-14. Valuations look undemanding at 12x FY13 PE and 3x PB.
3QFY11 results below estimates
Voltas’ 3QFY11 net profit, adjusted for exceptional income stood at Rs598m
(down 13% YoY), 10% lower than our expectations. Revenues increased by
5% YoY and came 2% lower than our estimates. This was on account of poor
performance from the EMP segment; unitary cooling and engineering
products businesses continued to post strong growth and margins.
Disappointing performance from EMP segment
Revenues in the EMP business fell by 3% YoY in 3QFY11, thanks to a sharp
11% decline in domestic revenues on account of execution delays. Ebit
margins contracted by 260bps, from 8.9% in 3QFY10 to 6.4% in 3QFY11,
partly on account of losses in one of the subsidiaries (Rohini Industrials
Electricals). These losses are likely to continue in 4QFY11 as well, though
management highlighted that quantum will be lower; we build in Rs50m of
losses in 4Q. Voltas won Rs5bn worth of new orders in 4Q (9mFY11:
Rs20.7bn, up 79% YoY); management mentioned that the company has also
signed a letter of intent for a “large” order but the same is not included in
backlog since it is still not a firm order.
Strong growth in unitary cooling, engineering products businesses
Revenues in engineering products and unitary cooling products segments
expanded by 22% and 28% YoY respectively. Management continues to see
strong growth in these businesses over the next few quarters and mentioned
that demand for room ACs has stayed strong in January.
We cut our FY11-13 EPS by 6-10%; maintain BUY
We have lengthened execution cycle for domestic electro-mechanical projects
by two months (to 16 months) in view of execution delays as well as
changing nature of the business (more infrastructure projects). We have also
built in Rs50m of possible losses in Rohini Industrial Electricals in 4Q, and
reduced margins in the EMP business by 50-75bps for FY12-13 to reflect
higher material costs. This leads to a 6-10% cut to our FY11-13 EPS. Maintain
BUY with a reduced target price of Rs240/sh (15x FY13 EPS).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
3QFY11 results
Adjusted for exceptional income, Voltas’ 3QFY11 net profit fell 13% YoY
and came 10% below our expectations. EMP business disappointed, with
revenues falling by 3% YoY and Ebit margins contracting by 260bps.
Unitary Cooling and Engineering Products businesses, however,
continued to record robust revenue and earnings growth. We cut our
FY11-13 EPS estimates by 6-10% to reflect lengthening execution cycle
and rising material costs. The stock should still yield 20% EPS Cagr over
FY11-14. Valuations look undemanding at 12x FY13 PE and 3x PB.
3QFY11 results below estimates
Voltas’ 3QFY11 net profit, adjusted for exceptional income stood at Rs598m
(down 13% YoY), 10% lower than our expectations. Revenues increased by
5% YoY and came 2% lower than our estimates. This was on account of poor
performance from the EMP segment; unitary cooling and engineering
products businesses continued to post strong growth and margins.
Disappointing performance from EMP segment
Revenues in the EMP business fell by 3% YoY in 3QFY11, thanks to a sharp
11% decline in domestic revenues on account of execution delays. Ebit
margins contracted by 260bps, from 8.9% in 3QFY10 to 6.4% in 3QFY11,
partly on account of losses in one of the subsidiaries (Rohini Industrials
Electricals). These losses are likely to continue in 4QFY11 as well, though
management highlighted that quantum will be lower; we build in Rs50m of
losses in 4Q. Voltas won Rs5bn worth of new orders in 4Q (9mFY11:
Rs20.7bn, up 79% YoY); management mentioned that the company has also
signed a letter of intent for a “large” order but the same is not included in
backlog since it is still not a firm order.
Strong growth in unitary cooling, engineering products businesses
Revenues in engineering products and unitary cooling products segments
expanded by 22% and 28% YoY respectively. Management continues to see
strong growth in these businesses over the next few quarters and mentioned
that demand for room ACs has stayed strong in January.
We cut our FY11-13 EPS by 6-10%; maintain BUY
We have lengthened execution cycle for domestic electro-mechanical projects
by two months (to 16 months) in view of execution delays as well as
changing nature of the business (more infrastructure projects). We have also
built in Rs50m of possible losses in Rohini Industrial Electricals in 4Q, and
reduced margins in the EMP business by 50-75bps for FY12-13 to reflect
higher material costs. This leads to a 6-10% cut to our FY11-13 EPS. Maintain
BUY with a reduced target price of Rs240/sh (15x FY13 EPS).
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