Voltas, a Tata Group company, has witnessed a remarkable surge in its stock price in recent months, reaching new highs with each passing month. From trading at ₹827 apiece in December, the company's shares have surged by 80%, now trading at ₹1,485 apiece. This recent rally has propelled the stock to gain 172% in last four years.
Meanwhile, the stock has recorded a significant 33% growth in Q1 FY25, driven by exceptionally high temperatures across major parts of India, which bolstered demand for cooling products. For context, temperatures in April were the highest recorded over eastern and northeastern (E&NE) India and the second highest over south India since 1901, according to IMD data.
The heat wave in the June quarter has led to record air conditioner sales of six million units in the April-June period, reflecting a year-on-year (y-o-y) growth of 50%, according to the Consumer Electronics and Appliances Manufacturers Association (CEAMA).
Voltas holds a dominant position in India's cooling products market, particularly as the leading Room Air Conditioner (RAC) brand in the country is set to benefit from the significant jump in sales. Additionally, the company has a robust presence in engineering products and electromechanical projects and services through Universal MEP Projects & Engineering Services Limited in India, and in the Middle East region.
Through its joint venture, Voltbek Home Appliances Private Limited (Voltbek), with Arçelik, a major European household appliance manufacturer, Voltas has significantly expanded its product offerings.
In the fiscal year 2023–24, Voltas achieved a milestone by selling over 2 million AC units, marking the highest sales volume for any brand in a single year in India. The company aims to achieve this figure within the first six months of the current calendar year.
According to the latest available data, the company has already sold one million AC units within the first 110 days of the current calendar year, achieving this milestone in a remarkably short time frame.
Despite facing recent market share challenges in the RAC segment, Voltas maintained its leading position in the AC market with an 18.7% market share by the end of FY24.
The competitive landscape in the Indian RAC market is intensifying with the presence of both domestic and prominent international players, and this competition is expected to further escalate in the near future. The industry's sales are seasonal, and any unpredictable weather changes during the summer season could potentially impact sales adversely.
Moreover, the recent implementation of Quality Control Orders (QCO) norms has affected component imports, posing additional challenges for the industry.
To maintain market leadership in the commercial refrigeration business, Voltas has introduced new energy efficient best-in-class star-rated (3-star to 5-star) freezers and convertible models and a new 5-star-rated glass top range with green refrigerant (hydrocarbon).
Domestic brokerage firm Prabhudas Lilladher forecasts 19.0% year-on-year revenue growth for Voltas' UCP segment in Q1 FY25, driven by heightened demand during the severe summer. However, it expects Beko to continue reporting losses.
The Engineering, Procurement, and Construction Services (EMPS) segment is projected to grow by 25% year-on-year, with minimised losses. Overall, it expects consolidated revenues to increase by 18.9% year-on-year, with an EBITDA margin of 6.4%, up 90 basis points compared to the previous year.
According to the brokerage, Voltas has increased prices by 3–5% and seems to be gaining market share. The brokerage expects the company to see healthy volume growth in Q1FY25, considering 9.5% revenue CAGR over Q1FY20–24 and +16.3% YoY revenue growth in Q1FY24 in the UCP segment.
The Indian RAC market is expected to grow at a healthy CAGR of 12% to reach a figure of ₹50,000 crore by 2028–29. The company is poised to lead this growth due to its superior product range, pan-India extensive channel network, and excellent service delivery to its customers.
Further, several other factors, such as increasingly hot summers, rising disposable incomes, and the quest for a better lifestyle with easy access to consumer finance, are expected to drive growth in this segment.
This growth is likely to be propelled by higher disposable incomes and an increasing share of organised distribution channels, according to the company's FY24 annual report.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
