Stock market today: Voltas’ share price has risen nearly 90% in a year and 57% year-to-date. Heavy selling during the summer has lifted investor sentiment, and the good performance in the first quarter is also boosting investor confidence.
Voltas had reported a 160% increase in net profit ₹335 Crore compared to the same quarter last year. Consolidated revenue increased by 46% to Rs. 5,001 Crore. The Unitary Cooling Products segment, which contributes more than 75% to the total revenue, recorded robust growth.
Here are 3 main reasons why Jefferies expects an upside potential of over 13% for the Voltas share price:
UCP segment leads growth:
Jefferies says Voltas’ Q1 success was driven by over 67% YoY volume growth in the UCP segment (primarily AC sales). Voltas reported a strong Q1FY25, helped by a robust summer season in India on a weaker base than last year. Unseasonal rains had impacted Q1FY24. Unitary Cooling Products (UCP; AC segment) was the main driver of growth, with 67% of volume driving growth in revenues up 51% and earnings before interest and tax up 58% YoY.
Turnaround in the EMP segment
The EMP (Electromechanical Projects) segment delivered positive operating performance (EBIT margins) after EBIT losses in 7 of the last 8 quarters.
In the first quarter of fiscal year 2025, the EMP segment again achieved a positive EBIT margin of over 5%, driven by solid project execution and timely assessment of costs and profitability, particularly in the United Arab Emirates and Saudi Arabia (international projects).
Jefferies expects the EMP EBIT margin (earnings before interest and taxes) to return to a positive single-digit level in the 2025/27 financial year.
Positive management comment
In the commercial refrigeration segment, demand for water coolers and dispensers was good and Voltas is a major manufacturer of freezers, water coolers and dispensers. Voltas’ new air cooler models are well received and Voltas has achieved 10.5% market share and is ranked 2nd. In electro-mechanical and EMP projects, the domestic business growth was 50% with the order book at Rs 4800 crore.
Earnings estimates revised upwards
Jefferies has raised earnings per share estimates for Voltas by 10-12% in FY2025-26 following a beat in Q1 FY2025. With strong summer sales in Q1 boosting Voltas’ revenues and the EMP segment showing a turnaround (positive EBIT margin) after several quarters of losses, Jefferies expects earnings before interest, taxes, depreciation and amortization (EBITDA) margin to rebound from 3.8% in FY2024 to 7.5% in FY2026, factoring in healthy UCP volumes and a gradual increase in EMP margins. Management expects a high-single-digit margin and Jefferies also estimates
Jefferies estimates compound annual net profit growth (CAGR) for the financial year 2025-27 at 24%, increasing the price target from 40 to 48, which is now 10% above the historical 5-year average multiple. They have raised the price target for Voltas shares to ₹1,770.
Disclaimer: The views and recommendations mentioned above are those of individual analysts or brokerage firms and not of Mint. We advise investors to seek advice from certified professionals before making any investment decisions.
