A dampener of a season led to a miss in UCP sales development on a par with peers although general margin miss was sharper due to reduced UCP/EPC margins. That stated, Voltas delivered UCP margins superior than peers. Overall, UCP final results reflect a strong competitive edge with healthful OPMs although Voltbek JV saw a ramp-up in each share/billing points. VOLT is nicely ready with greater RM inventory, 22K touch points and an expansive JV item variety to tap into any choose-up in CD industry. Competitive edge in RAC has additional gone up going by management commentary. With the JV variety moving greater/constant innovation, VOLT is set for development. Retain Buy.
Q1 miss led by each UPC/EPC: Voltas (VOLT) missed Q1 on income although Ebitda miss was sharper even as GMs stood steady (superior q-o-q). Overall OPMs also suffered from greater overheads. VOLT raised costs by 8–10% in common on RACs to pass on input price. After a double-digit drop in FY21 on the market level, mgmt expects FY22e to be far superior, but also hinted that attaining FY20 level will be difficult.
Competitive dynamics strong for VOLT: Mgmt described powerful operational efficiency for VOLT versus most massive peers like MNCs in Q1. While we anticipate VOLT’s competitive edge in RAC to provide superior development/OPMs as industry opens up, scale-up on the Voltbek JV is important offered existing 3.1/2.1% share in refrigerators/washing machines. Crossing a vital threshold of 4-5% remains important to VOLT’s re-rating, which would enable investors with clarity on breakeven timelines.
Outlook: All set to tap into development –VOLT has regularly delivered market-top development and returns in RAC. As buyers return in earnest, we anticipate RAC momentum to resume. Meanwhile the JV variety as well ought to scale up. Retain ‘BUY/SO’ with a revised TP of Rs 1,250 (versus `1,200) as we roll forward to Dec-22e.