By Voltas’ stock has experienced a remarkable surge over the past year, rising nearly 90% and showing a 57% increase year to date. This growth is largely attributed to the strong performance in its Unitary Cooling Products (UCP) segment, especially during a robust summer season that significantly lifted investor sentiment.
The company reported a 160% increase in net profit, reaching ₹335 crore in Q1 FY25, compared to the same quarter last year. Consolidated revenues also saw a notable jump, increasing by 46% to ₹5,001 crore.
The UCP segment, which includes air conditioners and related cooling products, played a crucial role in this performance, contributing more than 75% to the overall revenues.
Voltas’ success in the UCP segment was driven by a 67% year-on-year volume growth, a clear reflection of the strong demand for cooling products during the Indian summer.
The company’s performance in Q1 was particularly impressive given the weaker base of the previous year, where unseasonal rains had dampened sales. This year, however, the segment not only achieved a 51% rise in sales but also saw a 58% year-on-year increase in earnings before interest and tax (EBIT).
In addition to the UCP segment, Voltas’ Electro-Mechanical Projects (EMP) division also showed signs of a turnaround. After reporting EBIT losses in seven of the past eight quarters, the EMP segment managed to regain a positive EBIT margin of more than 5% during Q1 FY25.
This improvement was largely due to better project execution and a timely assessment of costs and profitability, particularly in international projects in the UAE and Saudi Arabia. Jefferies, a global investment firm, has noted this positive shift and expects the EMP EBIT margin to maintain a positive single-digit momentum over FY25-27.
Another factor contributing to Voltas’ strong market performance is the positive management commentary on the company’s commercial refrigeration segment. The demand for water coolers, dispensers, and air cooler models has been robust, with Voltas gaining a market share of 10.5% in the air cooler segment, securing the No. 2 position in the market. The domestic business growth in EMP projects was also impressive, with a 50% increase and an order book standing at ₹4,800 crore.
Given the strong Q1 performance and the turnaround in the EMP segment, Jefferies has revised its earnings estimates for Voltas upwards. The investment firm has increased its earnings per share estimates for FY25-26 by 10-12%, anticipating a revival in EBITDA margin from 3.8% in FY24 to 7.5% by FY26. This forecast is based on healthy volumes in the UCP segment and a gradual rise in EMP margins.
In line with these positive developments, Jefferies has also adjusted its target price for Voltas’ shares. The firm now expects the company’s net profit to grow at a compound annual growth rate (CAGR) of 24% over FY25-27, and has revised the target price to ₹1,770.
This new target price represents a 10% premium to the historical five-year average multiple, reflecting the market’s confidence in Voltas’ growth trajectory.
The strong performance of Voltas’ stock is a testament to the company’s ability to capitalize on favorable market conditions, particularly during the summer season.
The impressive growth in the UCP segment, coupled with the positive turnaround in the EMP division, has not only bolstered investor confidence but also positioned the company for continued success in the coming years. With analysts like Jefferies forecasting further upside potential, Voltas remains a stock to watch in the Indian market.
