Voltas Share price: 4 key reasons why Jefferies expects more than 13% upside for the stock post Q1 Results

Stock market today: Voltas share price has risen almost 90% in a year and 57% year to date. The strong Summer season sales have lifted investor sentiments and good Q1 performance is also supportive for the confidence of investors.

Voltas had reported a 160% increase in net profit at ₹335 crore. compared to the same quarter of previous year. The consolidated revenues increased by 46% to Rs. 5,001 crores. The Unitary Cooling products segment that contributes more than 75% to the over all revenues saw robust growth.

Here are 3 key reasons why Jefferies expects more than 13% upside for the Voltas share price-

UCP Segment Leads Growth:

Jefferies says that Voltas Q1 beat was driven by more than 67% year on year volume growth in UCP segment ( primarily AC sales). Voltas reported a strong Q1FY25 aided by a robust summer season sales in India on a weaker base of last year. The unseasonal rains had impacted Q1 FY24. Unitary Cooling Products (UCP; AC segment) was the main driver of growth, with 67% volumes driving growth in 51% rise in sales and 58% YoY rise in Earnings before interest and tax respectively.

Turnaround in EMP segment

EMP (Electro-mechanical Projects) segment delivered positive operating performance (EBIT margins) after EBIT losses in 7 of past 8 quarters.

During Q1FY25, the EMP segment regained a positive EBIT margin of more than 5%, led by healthy project execution and timely assessment of cost and profitability, especially in UAE and Saudi (international projects).

Jefferies estimates EMP EBIT (Earnings before interest and tax) margin to regain positive single-digit momentum over FY25-27

Positive management commentary

In commercial refrigeration, demand was good for water coolers and dispensers, and Voltas is a key manufacturer of freezers, water coolers and dispensers. Voltas new air cooler models are well accepted and Voltas has gained market share of 10.5%, and is at No 2 position. In Electro-mechanical Projects, EMP projects, domestic business growth stood at 50%, with order book at Rs4800 crore.

Earning estimates revised upwards

Jefferies has raised Voltas FY25-26 earnings per share estimates by 10-12% post Q1FY25 performance beat. As strong summer sales in Q1 boosted Voltas sales and EMP segment saw a turnaround (positive EBIT margin) after multiple quarters of loss , Jefferies expect a revival in earnings before interest tax depreciation and amortisation (Ebitda) margin from 3.8% in FY24 to 7.5% by FY26, factoring healthy volumes in UCP and gradual rise in EMP margins. Management expects high-single-digit margin and the same is estimated by Jefferies

Target price also moves up

Jefferies estimate FY25-27 annual net profit growth (CAGR) of 24% and thereby raise target price to earnings to 48 times from 40 times earlier, which is now at 10% premium to historical 5 years average multiple. They have revised Voltas share price target to ₹1,770.

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