Voltas - Near Term Cost Headwinds To Keep Margins Under Check: Nirmal Bang

Nirmal Bang Report

We hosted the management of Voltas Ltd. at our conference. Their commentary was quite bullish on the RAC space.

RAC volume for May grew by 100% YoY. For FY25, the management expects to clock in ~2.5 million units, and installed RAC capacity is expected to move up to 3.5 million by FY26-end.

The Chennai plant is expected to start operations in early H1 FY25. The management expects full cost absorption of the Chennai plant owing to the large scale of operations + logistic cost savings due to shipment to South India from the Chennai plant.

Long term vision of Voltas is to become a one-stop solution for all consumer durable products.

A write back in the EMPS provisioning done for the projects in Qatar could be a possibility in the medium term (one-two years’ timeframe).

We maintain Accumulate with a revised SOTP-based target price of Rs 1,340 valuing it at 45 times on FY26E earnings per share. While volumes are expected to be strong in the near term, the rise in costs of raw material + sea freight charges + ocean containers are expected to keep margins under check.

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