Home / Markets / Mark To Market /  Voltas sales recovery prospects brighten with onset of festive season

Voltas Ltd may have missed targets during peak summer season due to ongoing lockdowns but it maintained its leadership position and improved market share. Looking at the underpenetrated AC market in India that promises strong growth opportunities, analysts maintain a positive view. 

The onset of festive season will further revive sales momentum. The company’s joint venture for whitegoods manufacturing and sales is also progressing well and is expected to shape its forward growth prospects.

The stock, which has been on a downtrend this month having corrected more than 9%, was up almost 2% on Friday.

“Recent underperformance given weak 1Q AC sales is an opportunity to buy the stock, which should recover as festive season sales pick-up October onwards," said analysts at Jefferies India Pvt. Ltd in their note.

The easing of lockdown restrictions and reopening of the economy will drive sales for the AC segment. The company’s unitary cooling product (UCP) segment sales, which rose 19% year-on-year during the June quarter on a low base of last year, was down 60% sequentially impacted by lockdowns. 

The company’s UCP volume growth of 10% y-o-y, outpaced the low single-digit y-o-y growth seen by the industry. Also, Voltas was able to expand its market share to 26.7% at the end of June as against 25.6% at the end of February.

“Onam sales have been strong, with dealers looking forward to Diwali driven festive sales from October onwards. Pricing has been relatively stable, with limited promotional offers" said analysts at Jefferies.

Limited promotional spends bode well for margins that have been under pressure due to the rise in commodity costs. Pick up in sales can also result in price hikes and will help the company manage cost inflations.

Meanwhile, its joint venture Voltbek is seeing higher promotional activities and expansions to drive growth. Refrigerators, washing machines, microwave ovens and dishwashers are key product lines where the company is eyeing growth.

Analysts at Jefferies India Ltd estimates factor Voltbek reaching break-even at PBT levels (profit before tax) by FY25 and they have raised their FY22E-24 EPS by 2-5% to reflect reduced losses.

Analysts remain positive about the company’s prospects. “Continued market share gains in the RAC segment and a superior margin profile have been the key execution strengths of Voltas, which we expect to sustain," said analysts at Emkay Global Financial Services Ltd.

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