Q3-FY11 earnings updates on Voltas Ltd. : Keynote

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

Q3-FY11 earnings updates on Voltas Ltd.

Voltas Q3FY11revenue grew by 5.2% to `1039.28cr from `987.46cr on y-o-y basis. Consolidated income declined by 10% to `68.83cr from `76.46cr on y-o-y basis.

Revenue growth in Engineering Product & Services

Engineering Segment has registered a growth of  21.7% on y-o-y basis to `142.83cr as against `117.33cr on account of revival in Textile Machinery, Mining & Construction Equipment and Material handling business. It has  witnessed an improvement in EBIT margin of 400bps due to increased contribution from commissioning business which contributed around 27% to the revenue. During the last three quarters of FY11 this segment has registered a growth of 12% with 510bps margin expansion, and we expect Engineering segment to grow at 8% with sustained margin during FY12E.

Robust Growth in Unitary Cooling Product

UCP business has registered a growth of 30.5% on y-o-y basis to `197cr as against 151cr while its profit has increased by 0.4% on y-o-y basis with narrow decline in EBIT margin. Going forward we believe UCP business is set to grow at 25-30% on account of high domestic consumption.

Order book

Voltas has order book to tune of `4697cr out of which international order book stood at `3100cr and remaining `1600cr from domestic operations.

Marginal Decline in topline of Electro-Mechanical Projects & Services (EMP)

EMP business revenue declined by (3%y-o-y) to `692.61cr from 713.11cr due to slowdown in payments from main Contractors. EMP margins were down by 250bps on account of higher raw material, labour costs and also electrical jobs resulted a loss of `9cr in Rohini Industrial Electricals. During Q4FY11 the Company expects to demonstrate improved performance and losses will narrow down due to low profit jobs being completed, also domestic and International markets are likely to improve better segmental growth.

Concerns

Any negative growth in IIP numbers will curtail company's domestic growth rate in Engineering segment. In UCP segment Company faces stiff competition from Korean as well as domestic market. Rupee appreciation will impact export revenue for the company. Also increased competition from peers for EMP projects in international market.

Outlook & Valuation

AT CMP `168.10 stock trades at 14.95x FY11E EPS and 10.70x FY12E EPS, and EV/EBITDA of 10.42x and 7.16x for FY11E and FY12E respectively. We have a positive outlook on the company based on its strength towards project execution, technical expertise and innovation of new products and maintain our target price with a ‘buy’ recommendation.