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3Q adjusted PAT were below estimates at Rs565m, while sales was in line at Rs10.4bn. The core
projects business has been lacklustre due to execution delays and higher proportion of recent
orders, while the order book has declined 6% sequentially. Environment remains challenging. We
maintain our Sell rating.
3QFY11 earnings below estimate
Voltas reported 3Q11 results below our estimate. Consolidated revenue for the
quarter came in at Rs10.4bn (up 5% yoy) in line with our estimates of Rs10.7bn.
However EBITDA was down 12% yoy at Rs793m, while EBIDTA margins came in at 7.6%
(down 144bp yoy), below our estimates of Rs961m (9% margins).
Reported profit came in at Rs688m (down 10% yoy). However, this included one-off
related to profit from sale of properties and reversal of provisions, adjusted for which
profit came in at Rs565m (down 18% yoy), 23% below our estimates of Rs733m.
MEP segment reported revenues of Rs6.9bn in 3Q11 (down 3% yoy). We note that
the revenue from the segment has been at best flattish in the past four quarters, as the
company has an order book which has recent orders. PBIT margins for the MEP segment
declined to 6.4% (down 260bp yoy), continuing the downward trend in the segment margin over
the past 4 quarters.
But, the remaining two segments registered a strong revenue growth the quarter.
Engineering services segment reported revenues of Rs1.4bn (up 21.7% yoy) with PBIT margin at
17.5% (up 393bp yoy). Cooling product segment registered revenue of Rs2bn (up 27.9% yoy),
with PBIT margin at 9.7% (down 265bp yoy)
Order book, inflow declines sequentially
The core MEP segment reported order backlog of Rs47bn (down 6% qoq and yoy)
despite an order inflow at Rs5bn up 20% yoy, declining 26% qoq.
The sequential decline in order book keeps the pressure on order inflows in a toughening
macro environment and remains the key variable to watch out for the company
Core engineering business lackluster; maintain Sell
The core engineering business has remained lacklustre during 9M11. Although, the unitary
cooling products segment might continue to clock in strong performance, we expect overall
performance to remain muted during the coming quarters as the environment for project
execution remains challenging.
Margin is also likely to remain under pressure due to rising commodity prices. The stock is
currently trading at 15x FY12F P/E.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
3Q adjusted PAT were below estimates at Rs565m, while sales was in line at Rs10.4bn. The core
projects business has been lacklustre due to execution delays and higher proportion of recent
orders, while the order book has declined 6% sequentially. Environment remains challenging. We
maintain our Sell rating.
3QFY11 earnings below estimate
Voltas reported 3Q11 results below our estimate. Consolidated revenue for the
quarter came in at Rs10.4bn (up 5% yoy) in line with our estimates of Rs10.7bn.
However EBITDA was down 12% yoy at Rs793m, while EBIDTA margins came in at 7.6%
(down 144bp yoy), below our estimates of Rs961m (9% margins).
Reported profit came in at Rs688m (down 10% yoy). However, this included one-off
related to profit from sale of properties and reversal of provisions, adjusted for which
profit came in at Rs565m (down 18% yoy), 23% below our estimates of Rs733m.
MEP segment reported revenues of Rs6.9bn in 3Q11 (down 3% yoy). We note that
the revenue from the segment has been at best flattish in the past four quarters, as the
company has an order book which has recent orders. PBIT margins for the MEP segment
declined to 6.4% (down 260bp yoy), continuing the downward trend in the segment margin over
the past 4 quarters.
But, the remaining two segments registered a strong revenue growth the quarter.
Engineering services segment reported revenues of Rs1.4bn (up 21.7% yoy) with PBIT margin at
17.5% (up 393bp yoy). Cooling product segment registered revenue of Rs2bn (up 27.9% yoy),
with PBIT margin at 9.7% (down 265bp yoy)
Order book, inflow declines sequentially
The core MEP segment reported order backlog of Rs47bn (down 6% qoq and yoy)
despite an order inflow at Rs5bn up 20% yoy, declining 26% qoq.
The sequential decline in order book keeps the pressure on order inflows in a toughening
macro environment and remains the key variable to watch out for the company
Core engineering business lackluster; maintain Sell
The core engineering business has remained lacklustre during 9M11. Although, the unitary
cooling products segment might continue to clock in strong performance, we expect overall
performance to remain muted during the coming quarters as the environment for project
execution remains challenging.
Margin is also likely to remain under pressure due to rising commodity prices. The stock is
currently trading at 15x FY12F P/E.
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