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4Q11 adjusted PAT were below estimates at Rs806mn, while sales was in line at Rs16.8bn. The
core projects business has been lacklustre due to execution delays and legacy orders of Rohini
Electricals. While the order book has grown 3.6% sequentially, macro environment remains
challenging. We have a Sell rating.
4QFY11 earnings below estimate
Voltas reported 4Q11 results below our estimate. Consolidated revenues for the quarter of
Rs16.8bn (up 13% yoy) were in line with our estimates of Rs17bn.
However EBITDA at Rs1260mn (down 16.7% yoy) was below our estimates of Rs1464mn.
EBIDTA margins came in at 7.5% (down 266bp yoy), below our estimates of 8.6%. This is
most likely on account of loss making legacy projects in Rohini Electricals, since standalone
EBIDTA margins are stable yoy.
Reported profits were Rs988mn (down 28% yoy). However, this included one-off related to
profit from sale of properties, charge of voluntary retirement scheme and impairment of fixed
assets, adjusted for which profit came in at Rs806mn (down 36% yoy), 30% below our
estimates of Rs1152mn.
MEP segment reported revenues of Rs9.5bn in 4Q11 (up 2% yoy). We note that the revenue
from the segment has been at best flattish in the past five quarters, as the company has an
order book which has recent orders. PBIT margins for the MEP segment came at 8.3% (down
184bp yoy, up 195bp qoq), reversing the downward trend in the segment margin over the
past 4 quarters.
The remaining two segments registered a very strong revenue growth the quarter.
Engineering services segment reported revenues of Rs1.74bn (up 45.2% yoy), however, the
PBIT margin dropped significantly to 13.9% (down 594bp yoy). Cooling product segment
registered revenue of Rs5.5bn (up 29.3% yoy), with PBIT margin at 10.6% (up 22bp yoy).
Order book flat sequentially ; inflows down yoy
The core MEP segment reported order backlog of Rs48.9bn (up 4.1% qoq) as order inflow
was up 128% qoq to Rs11.4bn (down 32.4% yoy). The flat order book and yoy fall in inflow is
in line with the toughening macro environment in the country and we expect this to continue in
the coming quarters.
Core engineering business lacklustre
The core engineering business has remained lacklustre during FY11. 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 14x FY12F P/E.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
4Q11 adjusted PAT were below estimates at Rs806mn, while sales was in line at Rs16.8bn. The
core projects business has been lacklustre due to execution delays and legacy orders of Rohini
Electricals. While the order book has grown 3.6% sequentially, macro environment remains
challenging. We have a Sell rating.
4QFY11 earnings below estimate
Voltas reported 4Q11 results below our estimate. Consolidated revenues for the quarter of
Rs16.8bn (up 13% yoy) were in line with our estimates of Rs17bn.
However EBITDA at Rs1260mn (down 16.7% yoy) was below our estimates of Rs1464mn.
EBIDTA margins came in at 7.5% (down 266bp yoy), below our estimates of 8.6%. This is
most likely on account of loss making legacy projects in Rohini Electricals, since standalone
EBIDTA margins are stable yoy.
Reported profits were Rs988mn (down 28% yoy). However, this included one-off related to
profit from sale of properties, charge of voluntary retirement scheme and impairment of fixed
assets, adjusted for which profit came in at Rs806mn (down 36% yoy), 30% below our
estimates of Rs1152mn.
MEP segment reported revenues of Rs9.5bn in 4Q11 (up 2% yoy). We note that the revenue
from the segment has been at best flattish in the past five quarters, as the company has an
order book which has recent orders. PBIT margins for the MEP segment came at 8.3% (down
184bp yoy, up 195bp qoq), reversing the downward trend in the segment margin over the
past 4 quarters.
The remaining two segments registered a very strong revenue growth the quarter.
Engineering services segment reported revenues of Rs1.74bn (up 45.2% yoy), however, the
PBIT margin dropped significantly to 13.9% (down 594bp yoy). Cooling product segment
registered revenue of Rs5.5bn (up 29.3% yoy), with PBIT margin at 10.6% (up 22bp yoy).
Order book flat sequentially ; inflows down yoy
The core MEP segment reported order backlog of Rs48.9bn (up 4.1% qoq) as order inflow
was up 128% qoq to Rs11.4bn (down 32.4% yoy). The flat order book and yoy fall in inflow is
in line with the toughening macro environment in the country and we expect this to continue in
the coming quarters.
Core engineering business lacklustre
The core engineering business has remained lacklustre during FY11. 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 14x FY12F P/E.
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