Home >Markets >Mark To Market >Voltas proves its mettle with strong cooling products sales in Q4

MUMBAI: Shares of Voltas Ltd jumped 12% on Monday after the company impressed the Street with a better than expected performance in the March quarter.

Revenues grew 1.4% notwithstanding the loss of cooling products sales in end-March due to lockdowns. Even then, revenues at the cooling products division grew 20% from the year ago quarter. What’s more, Voltas maintained its market leadership room air conditioner (AC) business. “Voltas has achieved market leadership in the inverter AC segment in January-February 2020 within ACs, which is a positive as there has been some investor concern on their share versus LG and other players in this growing segment," Jefferies India Pvt. Ltd said in a note.

Positive finish.
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Positive finish.

The results are notably better than Blue Star Ltd, which also has large presence in cooling products business. Consolidated revenues of the company had dropped 18% last quarter. Revenues at the unitary cooling products division of Blue Star dropped 15%.

That said, Voltas’s results show notable a hit in its electro-mechanical projects and services division, the second big business division after cooling products business. Revenues at the division dropped 17% due to slowdown in project execution.

“Slow execution pace contributed to the revenue decline and margins reflect conservative time based provisions made amidst liquidity constraints. We believe some expected credit losses might have also been booked, though this clarity we will await for from the results call," adds analysts at Jefferies.

The company’s performance in the current quarter will play a crucial role in Voltas’s annual earnings.

The March-May period is the peak season, and generates more than a third of Voltas’s annual sales. While lockdowns were in full force in April, there were restrictions in much of May as well. This not only impacted sales volumes, but also pricing, with the rush to liquidate inventory.

According to Antique Stock Broking, Blue Star estimates the unitary cooling products industry to see a sales decline of 10-25% in FY21. “The demand pattern and behaviour of the consumers might undergo a change, and spend towards discretionary products may be withheld, temporarily affecting the growth of the industry in 2020-21," Voltas said in a statement.

Note that Monday’s gains notwithstanding, the Voltas stock is down about 26% from its highs earlier in the year.

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