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EARNINGS REVIEW
Voltas (VOLT.BO)
Sell Equity Research
Below expectations on inflows and margins – Sell
What surprised us
Voltas reported Q3FY11 net profit below our and Bloomberg consensus
expectations, as it surprised negatively on margins on top of the continued
lack of recovery in fresh order inflows (EBITDA margin dipped to 7.6% vs 9%
previous year; inflows dipped 21% sequentially). Revenue for the quarter
came at Rs 10.4 bn slightly below our and consensus estimates.
The Electro-mechanical Projects and Services (MEP) segment’s revenues
have declined 4% ytd. on subdued award activity from both Middle East
and India. Order book of the Segment stood at Rs 47 bn (1.5X 2011E
segment revenue), as compared to Rs 50 bn in the previous quarter
What to do with the stock
Order inflows continue to be our key concern for the MEP segment of the
company’s business (65% of est. FY11 revenue). This muted order inflow
would constrain overall growth for the company despite the robust pick up in
Seg B and Seg C that Voltas delivered in Q3 FY11. We have reduced our order
inflow and EPS estimates for the company for FY11E-13E by 0-3% based on
this continued trend. The stock now trades at 15X 12m fwd P/E in line
with its 5-yr median. Concerns on low order book coverage and
nearer term risks on fresh order inflows are the key reasons for our
below consensus FY12E and Sell rating on the stock. Our 12m TP of Rs
200 (Rs 204 earlier) is based on 15X FY12E P/E.
Risks: Pick-up of order inflows in the Middle East, with Voltas winning any
significant large-sized orders; stronger than expected pick-up in the
industrial capex cycle.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
EARNINGS REVIEW
Voltas (VOLT.BO)
Sell Equity Research
Below expectations on inflows and margins – Sell
What surprised us
Voltas reported Q3FY11 net profit below our and Bloomberg consensus
expectations, as it surprised negatively on margins on top of the continued
lack of recovery in fresh order inflows (EBITDA margin dipped to 7.6% vs 9%
previous year; inflows dipped 21% sequentially). Revenue for the quarter
came at Rs 10.4 bn slightly below our and consensus estimates.
The Electro-mechanical Projects and Services (MEP) segment’s revenues
have declined 4% ytd. on subdued award activity from both Middle East
and India. Order book of the Segment stood at Rs 47 bn (1.5X 2011E
segment revenue), as compared to Rs 50 bn in the previous quarter
What to do with the stock
Order inflows continue to be our key concern for the MEP segment of the
company’s business (65% of est. FY11 revenue). This muted order inflow
would constrain overall growth for the company despite the robust pick up in
Seg B and Seg C that Voltas delivered in Q3 FY11. We have reduced our order
inflow and EPS estimates for the company for FY11E-13E by 0-3% based on
this continued trend. The stock now trades at 15X 12m fwd P/E in line
with its 5-yr median. Concerns on low order book coverage and
nearer term risks on fresh order inflows are the key reasons for our
below consensus FY12E and Sell rating on the stock. Our 12m TP of Rs
200 (Rs 204 earlier) is based on 15X FY12E P/E.
Risks: Pick-up of order inflows in the Middle East, with Voltas winning any
significant large-sized orders; stronger than expected pick-up in the
industrial capex cycle.
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