Voltas tumbles after UBS downgrades stock, slashes target price

UBS believes that rising competition in the sector will exert pressure on Voltas’ margins

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Foreign broking firm UBS has taken a cautious stance on Voltas, while downgrading the stock to ‘neutral’ and, slashing the target price to Rs 840 from Rs 1,200 per share.

UBS believes that the challenges faced by the industry are expected to persist, making it a tough task for Voltas to expand its market share and enhance operational profit margins (OPM).

At 11am, the stock was trading at Rs 751.25 on the NSE, down 3.9 percent. Trading volumes at 1.9 million shares were higher than the 20-day average volume of 1.15 million shares.

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UBS believes that rising competition in the sector will exert pressure on Voltas’ margins, thus it has revised the earnings estimates for FY24 and FY25 downwards by 22 percent and 31 percent.

Brokerages have flagged off that Voltas’ air conditioners are losing market share to multinationals with the pie shrinking to 21.9 percent in FY23 from 25.2 percent in FY21.

UBS believes profitable ramp-up in refrigerators, washers by FY26 is a tall ask for the company.

On June 22, a block of 9.64 lakh shares worth Rs 780 apiece also changed hands. This comes on the back of lacklustre air conditioner (AC) sales this summer.

Dealer checks by Dolat Capital indicate unseasonal rain across many regions resulted in lower temperatures, dampening the enthusiasm among air conditioner players. April saw a decline in demand due to widespread downpour throughout the country, affecting the sale of ACs.

Dealers reported a significant uptick in sales in May, coinciding with the peak of summer heat. The western and southern regions experienced a slower offtake of RACs in June, according to channel checks until June 19.

In the March quarter, Voltas’ profit declined 21.2 percent year-on-year at Rs 143.92 crore. The operating performance was weak, revenue grew 10.88 percent year-on-year to Rs 2,957 crore, while EBITDA fell 16.4 percent to Rs 218.2 crore. Margins declined 240 basis points to 7.4 percent for the quarter.

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