Consumer durables major Voltas announced its earnings for the March quarter on Friday, beating analyst estimates for profit and margin led by unitary cooling products (UCP) segment. Earnings per share as on March 31, 2020, was higher at Rs 4.80 as compared to Rs 4.22 last year. The stock has corrected 30 percent from its 52-week high and is trading at a price-to-earnings of 32.
| Q4 FY20 | | Change |
| Revenues/sales (Rs cr) | 2,089 | 1.30% |
| EBITDA(Rs cr) | 192 | 33.10% |
| EBITDA margin | 9.19% | 219 bps |
| Net profit(Rs cr) | 159 | 13.60% |
Key takeaways:
Revenue headline numbers missed estimate given 18% decline in electro-mechanical projects segment
Cooling products segment revenue increased by 20 percent and was Rs 1,199 crore as compared to Rs 998 crore in the corresponding quarter last year. This despite substantial business loss in March 2020, which is the beginning of the peak season and year-end billings. Voltas continues to be the market leader and despite severe competition, it sustained its top position in room air conditioner business with a share of 24.2 percent, an increase of 50 basis points, at multi-brand outlets in February 2020 (YTD), as per the last data available.
Segment result was significantly higher by 68 percent at Rs 175 crore as compared to Rs 104 crore in the corresponding quarter last year.
Cooling products segment revenue growth
| Q4 FY 20 | 20% |
| Q3 FY 20 | 14% |
| Q2 FY 20 | 19% |
| Q1 FY 20 | 47% |
| Q4 FY 19 | -7% |
| Q3 FY 19 | -3% |
| Q2 FY 19 | 8% |
Electro-mechanical projects and services segment revenue for the quarter was Rs 805 crore as compared to Rs 976 crore in the corresponding quarter last year primarily due to slow pace of execution of projects while segment result was Rs 11 crore as compared to Rs 44 crore last year owing to conservative time-based provisions made amidst liquidity constraint.
The management highlighted that the international EMP operations were not impacted significantly as construction has been considered as an essential service by the respective governments.
EBITDA margin was ahead of analyst estimates, with UCP margins at 14.5 percent vs expectation of 11 percent while electro-mechanical segment margins languished at 4.5 percent.
Cooling products segment Margin
| Q4 FY 20 | 14.50% |
| Q3 FY 20 | 10.10% |
| Q2 FY 20 | 8.70% |
| Q1 FY 20 | 13% |
| Q4 FY 19 | 10.40% |
| Q3 FY 19 | 8.50% |
| Q2 FY 19 | 6.30% |
Net profit came 18 percent above the estimates led by strong operational performance in UCP segment.
Jefferies believes that the results would be viewed favorably by investors especially in the context of the negative COVID-19 impact on businesses declared by other industrial companies and a comparable peer Blue Star.
The management's focus has always been on monetising sales which reflects in the balance sheet. However, inventory days are up 25 percent YoY, which possibly reflect lack of dealer stocking opportunity due to the lockdown beginning in March.
Jefferies has maintained a 'buy' call with a target of Rs 615.
Morgan Stanley has maintained 'equal-weight' call with a target at Rs 519 per share. MS notes that the AC market share YTD improved to 24.2 percent from 23.9 percent in Q4F19.
First Published: Jun 1, 2020 1:03 PM IST
