In Wednesday’s trading session, shares of AC maker Voltas experienced a sharp decline of 9% during the opening trades. This plunge followed the company’s report of a 19% decrease in net profit for Q4FY24. The share price of Voltas fell by 9.15% to reach an intra-day low of Rs 1262 on the NSE.
According to the latest financials, Voltas recorded a consolidated net profit of Rs 116 crore for the quarter ending March 31, 2024, marking a notable decline from Rs 144 crore reported in the corresponding period of the previous year.
Despite the decline in net profit, the company witnessed a significant 42% increase in consolidated revenue from operations, reaching Rs 4,203 crore in Q4FY24 compared to Rs 2,957 crore in Q4FY23.
However, there was a dip in the EBITDA margin, which stood at 4.5%, reflecting a decrease of 280 basis points year-on-year.
Despite these challenges, Voltas’ unitary cooling products (UCP) business continued to outperform the market, maintaining its position as the market leader with a year-to-date market share of 18.7%. The robust revenue growth in the UCP segment was supported by favorable weather conditions and the company’s strong presence in this
Brokerages on Voltas
Motilal Oswal on Voltas
Motilal Oswal has reiterated a BUY rating on Voltas stock. However, the brokerage firm plans to reassess its assumptions following the conference call scheduled for May 8th, 2024.
According to the latest report from Motilal Oswal’s report on Voltas, the company’s fourth-quarter revenue for FY24 reached Rs 42.0 billion, aligning with estimates.
This marked a substantial 42% year-on-year increase, driven by strong growth in the Electro-Mechanical Projects and Services (EMPS), Unitary Cooling Products (UCP), and Engineering Products and Services (PES) segments, which saw growth rates of 47%, 44%, and 10% respectively.
However, despite the revenue growth, the earnings before interest, taxes, depreciation, and amortization (EBITDA) declined by 13% year-on-year to Rs 1.9 billion, significantly below the estimated figure.
This decline was primarily attributed to sustained losses in the EMPS segment. Operating profit margin (OPM) contracted by 2.8 percentage points year-on-year to 4.5%, falling short of the estimated 6.7%. Adjusted profit after tax (PAT), adjusted for prior period tax, also saw a significant decrease of 28% year-on-year to Rs 1.0 billion, compared to the estimated Rs 2.3 billion.
Despite these challenges, the Unitary Cooling Products segment demonstrated strong volume growth of approximately 27% year-on-year overall, with Room Air Conditioner (RAC) volumes growing by 35% year-on-year.
Voltas maintained a year-to-date market share in the RAC segment, comprising both split and window AC, at 18.7% as of March 2024, slightly lower than the 19% reported in December 2023.
InCred Equities on Voltas
According to insights from InCred Equities’ report on Voltas, despite anticipating robust revenue growth, the company grapples with significant margin pressures due to sustained losses in its Electro-Mechanical Projects (EMP) segment over recent quarters. Currently, InCred Equities holds a HOLD rating on the stock with a target price of Rs 1,115.
In terms of financial performance, Voltas recorded revenue of Rs 42 billion, marking a substantial 42% year-on-year increase and a notable 60% quarter-on-quarter surge.
This figure exceeded InCred Equities’ estimates by 20% and consensus estimates by 10%, primarily driven by a remarkable 44% year-on-year surge in revenue from the Unitary Cooling Products (UCP) segment, reaching Rs 30 billion.
However, the company sustained margin pressure, with Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) declining by 13% year-on-year to Rs 1.9 billion. This figure fell significantly short of both InCred Equities’ estimates by 25% and consensus estimates by 27%.
In the Projects business segment, the Domestic Projects business, encompassing Mechanical, Electrical, Plumbing, Water, and Solar segments, exhibited a robust 38% year-on-year growth propelled by a healthy order book.
Conversely, the International project business faced challenges, particularly in Qatar, due to unreasonable delays in the release of due receivables and prolongation of execution timelines. Voltas reassessed its exposure to these delays, resulting in a loss of Rs 1.08 billion.
Additionally, raw material costs surged by 46% year-on-year to Rs 33.7 billion, while other expenses rose by 74% year-on-year to Rs 4.4 billion. Consequently, total expenditure increased by 47% year-on-year during the quarter.
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