Voltas Ltd Research Report By ICICI-Direct

Voltas, India’s leading room air conditioner (RAC) manufacturer (with ~20% volume market share) & electro-mechanical project & services (EMPS) player, is set to benefit from a changing demographic profile & revival in India’s investment cycle. Its unitary cooling products (UCP) division’s revenue has grown at 16% CAGR in FY10-14 mainly due to a change in product mix towards premium products. With sustained demand from tier-II, tier-III cities and rising trend of urbanisation, we expect the UCP division to witness volume growth of ~8% (vs. ~5% industry growth) for FY14-17E. In the EMPS business, Voltas’ strategy to focus on profitability by bidding for small size, high margin projects and their timely execution would help in margin expansion in future. Given the strong performance of UCP division, its contribution to revenue may change from current 39% to 44% by FY17E. We expect consolidated sales, earnings CAGR of ~12%, ~24%, respectively, in FY14-17E. We initiate coverage on Voltas with a BUY rating.

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