Voltas misses out on key summer sales once again
PremiumAnalysts at Kotak Institutional Equities have cut their FY22 Ebitda estimates by 21% after a weak Q1 show by Voltas
Voltas Ltd saw another peak sales season getting impacted by pandemic-led lockdowns. The impact in the June quarter was less severe compared to the same period last year and year-on-year sales growth still remained good. However, the caution will prevail on earnings growth in FY22 since the June quarter remains the most important quarter for sales of cooling products.
Not surprising the stock has been trending down too. While it has lost more than 10% since the highs of June, it fell almost 5% in the last two trading sessions post results.
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Net revenue and Ebitda rose 38% and 103% year-on-year, respectively, in the June quarter thanks to the low base of last year. The figures, however, lagged analysts’ estimates. Those at HDFC Securities Ltd forecast the company to report net revenue and Ebitda growth of 69% and 250%, respectively.
Revenue of the unitary cooling products or UCP segment grew 19% year-on-year. However, this was on the low base of last year when sales plunged 60%. The positive for Voltas is that UCP volume grew 10% year-on-year, outpacing the industry’s low single-digit growth. Also, Voltas has expanded its market share to 26.7% at the end of June, from 25.6% at the end of February.
The pandemic also impacted the performance of electro-mechanical projects and services segment. The segment posted a revenue jump of 67% year-on-year to ₹688 crore in the June quarter. This was, however, significantly lower than the ₹1,104 crore revenue in the March quarter.
The consolidated order book is at ₹6,140 crore, which means segment revenues can pick up fast when things turn around.
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There could be some recovery in air-conditioner sales moving forward during the start of the festive season, and analysts say that low channel inventory is also likely to help.
“With the summer season behind, Voltas has limited room to surprise on earnings, especially given the strong base quarters (of last year)," said analysts at Motilal Oswal Financial Services Ltd (MOFSL).
What’s more, the weakness in demand means that the company also has not been able to fully pass the rise in raw material costs.
Given a weak Q1FY22 and muted margin commentary, analysts at Kotak Institutional Equities have cut their Ebitda estimates for this fiscal by 21%.
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