Some green shoots in ordering environment: The quarter with flattish
growth on order book at Rs45.74bn. The domestic market contributed Rs
21.93bn (~up by 14% YoY) and Export market contributed ~Rs 23.81bn
(down by 10% YoY) to overall order book. The orders received in this
quarter stood at ~Rs7.69bn (up by 2.8x YoY). The company has started to
see some green shoots in markets like Saudi Arabia, Abu Dhabi and Muscat
and Qatar. In Abu Dhabi, the main contractor for the airport order has
been formalized and soon the sub-contractors would be appointed by
October. Also, there has been US$4.6 billion worth infusion into ALDAR,
the primary real estate developer in Abu Dhabi. Also few tenders are in
the process of being funded in Qatar for the upcoming FIFA 2022 and are
expected to be released from Q3 onwards. In domestic markets, the
growth continued due to increased focus on urban infrastructure and
industry like metals and automotives, and the expansion of scope of work
on existing projects, such as the Chennai Metro.
Gaining market share in UCP: Voltas saw 15% volume growth in Airconditioners
ahead of Industry which reported de-growth of 5%. Our
overall growth has been supported by a strong advertising campaign based
on well researched consumer insights, culminating in the “all-weather”
proposition. The extended summer and delayed onset of monsoon also
helped volumes. Voltas has emerged as the market leader in the Room AC
segment in May 2012 across multi-brand outlets with an 18.3% share
(independently reported by GfK Nielsen) which was further improved to
19.1% in June – widening the earlier lead of 60 bps over the nearest
competitor in May to 280 bps in June.
Outlook and Valuation: The stock is trading at 11.1x FY14E earnings. We
believe that the worst might be behind us, given the pain on Sidra project
already been accounted for and RIE’s likely to break even in FY13. The
outlook on orders look bright given the increased reach in terms of
geography in international markets and business segments in the domestic
market.. We believe that a lot of pessimism related to order flow is in the
price and hence, downside seems to be limited.
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