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Voltas (VOLT)
Industrials
Results below expectations; Margins disappoint. Disappointing results with revenue
of Rs10.4 bn (up 5% yoy) and margins of 7.6% (down 140 bps yoy). Disappointment
led by EMP segment with 3% revenue decline and lower-than-expected margins (250
bps yoy decline). Strong revenue growth in UCP and Engg segments but Engg margins
significantly below expectations. Order inflows of Rs5 bn in 3Q and Rs22 bn in 9MFY11
suggest risk to full year estimate of Rs31 bn. Revise estimates, retain REDUCE.
Results below expectation: Revenue in line but steep decline in margins versus expectation
Voltas reported 3QFY11 consolidated revenues of Rs10.4 bn, up 5% yoy and marginally higher
versus our estimate of Rs10.2 bn. Margins contracted by 140 bps yoy on the back of higher
employee and other expenses as a percentage of sales, potentially led by negative operating
leverage (EMP topline decline). Margin disappointment led to a PBT decline of 15% on a yoy basis
to Rs836 mn (Rs983 an year ago) versus our expectation of Rs1,085 mn. Reported PAT is Rs688
mn versus our expectation of Rs725 mn but contains an exceptional item of Rs155 mn.
EMP segment declines on both revenues and margins; margins of other segments disappoint
EMP segment leads disappointment on both revenue and margins: EMP segment reported
a 3% yoy revenue decline, in line with our expectations. EBIT margin at 6.4% was significantly
below our estimate of 8.25% and 250 bps below last year 8.9% margins. Lower profitability
has been attributed to lower revenue booking in the quarter.
UCP does well on revenue; sharp margin fall partially in line with expectations: UCP
segment reported strong growth (at 28% on a yoy basis). Margin corrected sharply to 9.7%
versus 12.3% last year in the same quarter, and versus our expectation of 10% EBIT margins.
Strong revenue growth in enginnering products and services but margins decline
sharply: The segment reported 22% yoy revenue growth. Margin declined significantly to
17.5% versus 21% in the previous sequential quarter and below our expectation of 22%.
Order inflow just about keeps pace with full-year estimate; backlog falls on a qoq and yoy basis
Voltas reported an order backlog of Rs47 bn, declining on sequential quarter basis (Rs50 bn) as
well as on a yoy basis (Rs50 bn). Order inflow for 3QFY11 was Rs5 bn versus Rs4.16bn in 3QFY10.
Reiterate REDUCE with a target price of Rs200/share; revise estimates
We revise our EPS estimates to Rs10.6 and Rs12.1 from Rs11.8 and 13.5 for FY2011E and
FY2012E, respectively, to incorporate for lower EMP order inflows as well as margins. Reiterate
REDUCE with a target price of Rs200 based on (1) limited upside to target price, (2) potential
headwind of margin pressure and (3) slow pick-up in execution of new projects.
Results below expectations for margins, inline for revenues
Voltas reported 3QFY11 revenues of Rs10.4 bn versus Rs9.9bn in 3QFY10 (up 5% yoy )and
inline with our estimate of Rs10.2 bn. EBITDA at 7.6% missed last year’s value by 140 bps
and our estimate by 220 bps led by cost increases under all three heads of raw material,
employee and other operating expenses as a percentage of sales. The margin decline was
attributed to decline in EMP sales, leading to negative operating leverage.
The margin disappointment led to a PBT decline of 15% on a yoy basis to Rs836 mn (Rs983
an year ago) versus our expectation of Rs1,085 mn. Reported PAT is Rs688 mn versus our
expectation of Rs725 mn but contains an exceptional item of Rs155 mn on a pre-tax basis.
For the non months ending December 31, 2010, Voltas reported revenues of Rs35.2 bn
recording a moderate growth of 5.2% yoy. EBITDA margins contracted by about 90 bps yoy
leading to a net PAT of Rs2.3 bn in 9MFY11, down 4% on a yoy basis.
EMP leads revenues and margins decline; other segments’ margins decline
Electromechanical Projects: Disappoints on both revenue and margins
Electromechanical Projects segment reported a yoy decline in revenues to Rs6.9 bn from
Rs7.1 bn last year, down 3% yoy. The segment also reported lower EBIT margin of 6.4%
versus our expectation of 8.3% and 8.9% in 2QFY10.
UCP delivers revenue growth; margins inline but fall yoy
Unitary Cooling Products segment reported yoy growth of 27.9% to Rs1.97 bn. This was
versus our expectation of a 30% growth. Margins contracted significantly on a sequential as
well as yoy basis to 9.5% from 12.3% in 3QFY11. We had expected margins to fall by about
60 bps to 10.3%.
Engineering Products and Services: Strong Revenue growth, disappoint on margins
Engineering Products and Services reported revenues of Rs1.97 bn recording a strong
growth of 22% yoy versus our expectation of a 6.6% growth. Margins improved on a yoy
basis to 17.5% in 3QFY11 from 13.5% in 3QFY10. This was, however, below our estimate
of 22% EBIT margin—in line with 2QFY11 margin levels.
Revised Estimates imply muted growth in 4Q
Our estimates build in a revenue growth of 6.3% yoy in FY2011E to Rs51.2 bn from Rs48.2
bn in FY2010. This implies a revenue growth requirement of 8.9% (Rs16.1 bn) in 4QFY11E
at the consolidated level. FY2011E EBITDA margin of 9.2% implies a margin of 9.6% in
4QFY11E, assuming fall in margins from 10.1% in 4QFY10. Our full-year PAT estimate of
Rs3.5 bn implies a PAT requirement of Rs1.26 bn in 4QFY11E, flat yoy (versus Rs1.24 bn
reported in 4QFY10).
Order inflow just about keeps pace; backlog falls on a qoq and yoy basis
Voltas reported an order backlog of Rs47 bn, declining on sequential quarter basis (Rs50 bn)
as well as on a yoy basis (Rs50 bn). Order inflow for 3QFY11 was Rs5 bn. We expect Voltas
to order inflow of Rs37.2 bn for the full year 2011E. Hence, the company is just about
keeping pace with our expectations in terms of order inflows. The order inflows in 1QFY11
were boosted by four international orders including a tunnel ventilation project for Metro
Rail in Singapore. The exact mix of domestic and international backlog or inflows in 2QFY11
and 3QFY11 is not yet known.
Revise earning estimates; reiterate REDUCE with a target price of Rs200/share
We revise our EPS estimates to Rs10.6 and Rs12.1 from Rs11.8 and 13.5 for FY2011E and
FY2012E, respectively, to incorporate for lower EMP order inflows as well as margins. Our
target price of Rs200/share is based on 17X FY2012E earnings estimates. We would revisit
our estimates and target price post today’s conference call.
Key changes in our assumption include lower EMP order inflows reducing total inflows in
FY11E to Rs31 bn from Rs7.2bn earlier (down 16.7%) and a similar decline in FY12E order
inflows to Rs35.6bn We also reduce our EBITDA margins estimates to 9% and 9.2% for
FY11E and FY12E, a decline of 4-5%.
We retain our REDUCE rating on the company based on (1) limited upside to our FY2012E
based target price, (2) potential headwind of margins pressure and (3) slow pick-up in
execution of new projects. Key upside risks to our estimates could come from stronger-than
expected order inflows and execution pick-up in the EMP segment, particularly from
international markets.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Voltas (VOLT)
Industrials
Results below expectations; Margins disappoint. Disappointing results with revenue
of Rs10.4 bn (up 5% yoy) and margins of 7.6% (down 140 bps yoy). Disappointment
led by EMP segment with 3% revenue decline and lower-than-expected margins (250
bps yoy decline). Strong revenue growth in UCP and Engg segments but Engg margins
significantly below expectations. Order inflows of Rs5 bn in 3Q and Rs22 bn in 9MFY11
suggest risk to full year estimate of Rs31 bn. Revise estimates, retain REDUCE.
Results below expectation: Revenue in line but steep decline in margins versus expectation
Voltas reported 3QFY11 consolidated revenues of Rs10.4 bn, up 5% yoy and marginally higher
versus our estimate of Rs10.2 bn. Margins contracted by 140 bps yoy on the back of higher
employee and other expenses as a percentage of sales, potentially led by negative operating
leverage (EMP topline decline). Margin disappointment led to a PBT decline of 15% on a yoy basis
to Rs836 mn (Rs983 an year ago) versus our expectation of Rs1,085 mn. Reported PAT is Rs688
mn versus our expectation of Rs725 mn but contains an exceptional item of Rs155 mn.
EMP segment declines on both revenues and margins; margins of other segments disappoint
EMP segment leads disappointment on both revenue and margins: EMP segment reported
a 3% yoy revenue decline, in line with our expectations. EBIT margin at 6.4% was significantly
below our estimate of 8.25% and 250 bps below last year 8.9% margins. Lower profitability
has been attributed to lower revenue booking in the quarter.
UCP does well on revenue; sharp margin fall partially in line with expectations: UCP
segment reported strong growth (at 28% on a yoy basis). Margin corrected sharply to 9.7%
versus 12.3% last year in the same quarter, and versus our expectation of 10% EBIT margins.
Strong revenue growth in enginnering products and services but margins decline
sharply: The segment reported 22% yoy revenue growth. Margin declined significantly to
17.5% versus 21% in the previous sequential quarter and below our expectation of 22%.
Order inflow just about keeps pace with full-year estimate; backlog falls on a qoq and yoy basis
Voltas reported an order backlog of Rs47 bn, declining on sequential quarter basis (Rs50 bn) as
well as on a yoy basis (Rs50 bn). Order inflow for 3QFY11 was Rs5 bn versus Rs4.16bn in 3QFY10.
Reiterate REDUCE with a target price of Rs200/share; revise estimates
We revise our EPS estimates to Rs10.6 and Rs12.1 from Rs11.8 and 13.5 for FY2011E and
FY2012E, respectively, to incorporate for lower EMP order inflows as well as margins. Reiterate
REDUCE with a target price of Rs200 based on (1) limited upside to target price, (2) potential
headwind of margin pressure and (3) slow pick-up in execution of new projects.
Results below expectations for margins, inline for revenues
Voltas reported 3QFY11 revenues of Rs10.4 bn versus Rs9.9bn in 3QFY10 (up 5% yoy )and
inline with our estimate of Rs10.2 bn. EBITDA at 7.6% missed last year’s value by 140 bps
and our estimate by 220 bps led by cost increases under all three heads of raw material,
employee and other operating expenses as a percentage of sales. The margin decline was
attributed to decline in EMP sales, leading to negative operating leverage.
The margin disappointment led to a PBT decline of 15% on a yoy basis to Rs836 mn (Rs983
an year ago) versus our expectation of Rs1,085 mn. Reported PAT is Rs688 mn versus our
expectation of Rs725 mn but contains an exceptional item of Rs155 mn on a pre-tax basis.
For the non months ending December 31, 2010, Voltas reported revenues of Rs35.2 bn
recording a moderate growth of 5.2% yoy. EBITDA margins contracted by about 90 bps yoy
leading to a net PAT of Rs2.3 bn in 9MFY11, down 4% on a yoy basis.
EMP leads revenues and margins decline; other segments’ margins decline
Electromechanical Projects: Disappoints on both revenue and margins
Electromechanical Projects segment reported a yoy decline in revenues to Rs6.9 bn from
Rs7.1 bn last year, down 3% yoy. The segment also reported lower EBIT margin of 6.4%
versus our expectation of 8.3% and 8.9% in 2QFY10.
UCP delivers revenue growth; margins inline but fall yoy
Unitary Cooling Products segment reported yoy growth of 27.9% to Rs1.97 bn. This was
versus our expectation of a 30% growth. Margins contracted significantly on a sequential as
well as yoy basis to 9.5% from 12.3% in 3QFY11. We had expected margins to fall by about
60 bps to 10.3%.
Engineering Products and Services: Strong Revenue growth, disappoint on margins
Engineering Products and Services reported revenues of Rs1.97 bn recording a strong
growth of 22% yoy versus our expectation of a 6.6% growth. Margins improved on a yoy
basis to 17.5% in 3QFY11 from 13.5% in 3QFY10. This was, however, below our estimate
of 22% EBIT margin—in line with 2QFY11 margin levels.
Revised Estimates imply muted growth in 4Q
Our estimates build in a revenue growth of 6.3% yoy in FY2011E to Rs51.2 bn from Rs48.2
bn in FY2010. This implies a revenue growth requirement of 8.9% (Rs16.1 bn) in 4QFY11E
at the consolidated level. FY2011E EBITDA margin of 9.2% implies a margin of 9.6% in
4QFY11E, assuming fall in margins from 10.1% in 4QFY10. Our full-year PAT estimate of
Rs3.5 bn implies a PAT requirement of Rs1.26 bn in 4QFY11E, flat yoy (versus Rs1.24 bn
reported in 4QFY10).
Order inflow just about keeps pace; backlog falls on a qoq and yoy basis
Voltas reported an order backlog of Rs47 bn, declining on sequential quarter basis (Rs50 bn)
as well as on a yoy basis (Rs50 bn). Order inflow for 3QFY11 was Rs5 bn. We expect Voltas
to order inflow of Rs37.2 bn for the full year 2011E. Hence, the company is just about
keeping pace with our expectations in terms of order inflows. The order inflows in 1QFY11
were boosted by four international orders including a tunnel ventilation project for Metro
Rail in Singapore. The exact mix of domestic and international backlog or inflows in 2QFY11
and 3QFY11 is not yet known.
Revise earning estimates; reiterate REDUCE with a target price of Rs200/share
We revise our EPS estimates to Rs10.6 and Rs12.1 from Rs11.8 and 13.5 for FY2011E and
FY2012E, respectively, to incorporate for lower EMP order inflows as well as margins. Our
target price of Rs200/share is based on 17X FY2012E earnings estimates. We would revisit
our estimates and target price post today’s conference call.
Key changes in our assumption include lower EMP order inflows reducing total inflows in
FY11E to Rs31 bn from Rs7.2bn earlier (down 16.7%) and a similar decline in FY12E order
inflows to Rs35.6bn We also reduce our EBITDA margins estimates to 9% and 9.2% for
FY11E and FY12E, a decline of 4-5%.
We retain our REDUCE rating on the company based on (1) limited upside to our FY2012E
based target price, (2) potential headwind of margins pressure and (3) slow pick-up in
execution of new projects. Key upside risks to our estimates could come from stronger-than
expected order inflows and execution pick-up in the EMP segment, particularly from
international markets.
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