The Q3FY22 results of Voltas (VOLT) appear to be a sharp miss on PAT/top line while Ebitda is in line. Qualitatively, we believe, results are better than expected, reflecting solid growth in cooling, if one looks beyond the sharp drop in other income/EPC sales and higher loss from JV. Both Q3/9M growth are in healthy double-digits versus 2-year average, led by pricing.
In our view, the results show VOLT’s competitive edge over peers—in restocking of RACs and price-cost performance. The upcoming season, after two back-to-back weak summers, raises hopes though. We remain confident of VOLT’s Q4 ask given a solid 9M showing. Retain ‘Buy’; VOLT is also our top durables pick.
Q3 a miss, but not worrisome: Better UCP showing (21% growth for 9M and a mere 30bp margin drop versus 3Y average – implying higher growth for RAC versus CAC), EPC and agency margins aided in-line Ebitda, reflecting better operational showing. VOLT’s UCP growth/margins stood better than peers. VOLT sustained a lower volume drop in Q3 at 4% (industry drop of 5%, secondary data).
Trigger over 12–24 months for VOLT: Q4 ask for cooling business seems achievable and outperformance will depend on season stocking. VOLT’s share ramp-up potential in air coolers and JV range will remain key for investors, which augurs well for overall competitive positioning.
Outlook: Sustainable competitive edge – VOLT’s performance across consumer growth cycles has been industry-leading—be it growth/profitability, reflecting its better brand positioning in our view. Retain ‘BUY/SO’ even as we trim FY22/23e EPS by 26/11% building in JV loss/EPC with an unchanged SoTP of `1,436 as we roll forward to Q1FY24e.
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