Will early onset of summer help Voltas? Goldman Sachs, Jefferies have opposing views

Voltas shares have surged 15 percent in 15 days following reports of early onset of summer in India. Foreign brokerage firm Jefferies said last week that abnormal heat wave can spur demand, coupled with price hikes, leading to improved volume and margin outlook.

Goldman Sachs, however, has an opposing view. “Even during peak warm years, the industry recorded a compounded annual growth rate (CAGR) of only 6-8 percent over 10-15 years,” it said on February 27.

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The mid-single-digit growth does not enthuse confidence in analysts of Goldman Sachs. They have a ‘sell’ rating on the stock with a target of Rs 840 per share.

Jefferies, on the other hand, has a ‘buy’ tag with Rs 1,050 target on the stock. “Dealers are highlighting that lower commodity prices have not been passed on in product pricing. This points to improved volume outlook. The company has also regained some of its lost market share,” it said.

According to Bloomberg consensus, the stock has 20 ‘buy’ calls, 17 ‘hold’ calls and seven ‘sell’ calls on it. The 12-month target price for the stock is Rs 948 apiece, which indicates a 6.6 percent upside from the current levels. It was trading at a price-to-earnings multiple of 57.6x compared to its 10-year average P/E of 38.4x in the afternoon trade.

In the third quarter, the air conditioning and engineering services provider reported a consolidated net loss of Rs 110.49 crore on account of provisioning made on overseas projects. The Tata Group firm had posted a consolidated net profit of Rs 96.56 crore in the October-December quarter last fiscal.

Its revenue from operations was up 11.82 percent to Rs 2,005.61 crore during the quarter under review as against Rs 1,793.59 crore in the year-ago period. At 1pm, the stock was quoting at Rs 881 on the NSE, lower by 1.56 percent from the previous close.

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