Voltas shares can surge up to 21% as intense summer expected to drive sales, suggest brokerages

Domestic and global brokerage firms remain bullish on Voltas, a Tata Group company, after it expressed confidence in meeting the demand for air conditioners (ACs) and stated that it has endeavoured to grow above the industry growth rate.

The industry is expected to witness strong sales in CY25 on the back of extreme heatwaves across the country, similar to those seen in CY24. Early signs of summer are already visible in the West and South India. 

So far in the current fiscal year, the RAC (Room Air Conditioner) industry has grown 30%, but Voltas has outpaced the industry, growing by 35%.

The company has retained its earlier guidance on market share gains in RAC and high-single-digit EBIT margins, with a focus on absolute growth in the UCP (Unitary Cooling Products) segment. 

Voltas commands the highest market share of 21% in the RAC category, though it recently experienced a market share loss in the first 2 months of the current calendar year.  VoltBek continues to gain market share across categories, though analysts note that breakeven may be delayed by another two to three months (versus the earlier estimate of March 2025).

Voltas also indicated that there would be no price hikes. The company undertook price hikes in May–June 2024 but has no plans for further increases as it believes that raising prices at the start of summer would not be well received by customers and could interfere with its goal of remaining a mass-market brand.

Margins are not a concern, as management will focus on absolute revenue and EBITDA while increasing market share through higher volume sales. It aims to offset the recent inflation in raw material costs (copper, aluminum, and USD-INR exchange rates) through value engineering.

On the capacity front, the company expects its Chennai plant to reach optimum capacity by FY26, compared to 40–45% utilisation currently. The Pant Nagar plant is operating at full capacity (1.5 million units), similar to last year.

Regarding compressor availability, the company, without quantifying figures, guided for sufficient compressor supply for the season, including for its market share gains. It continues to evaluate various options, including joint ventures and technology transfer arrangements, from a long-term supply security perspective.

The government recently waived BIS certification for compressors above 2 tons (10% of the total industry), and the industry hopes for similar exemptions for compressors below 2 tons, given inadequate domestic supply (demand for 13–14 million units versus a capacity of 7–8 million units), according to domestic brokerage firm Nuvama Institutional Equities.

Nuvama, Morgan Stanley and Antique stay bullish on Voltas 

Following the company's healthy growth outlook, Nuvama retained its 'buy' rating on the stock with a target price of ₹1,810 per share, which indicates an upside potential of 21% from the stock's previous closing price of ₹1495. 

Morgan Stanley retained its 'overweight' rating with a target price of ₹1,556. Likewise, Antique Stock Brokerage also maintained its 'Buy' tag on the stock and expects it to reach ₹1,779 per share.

Meanwhile, CLSA has a 'Hold' rating with a price target of ₹1,375, and Japanese brokerage firm Nomura has a 'Neutral' rating with a target of ₹1,404 per share. HSBC also retained its rating but lowered its target price to ₹1,630 from ₹1,850, citing delayed margin recovery prospects for the UCP segment.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.