19 March 2025

Company Update | Sector: Consumer Durables

Voltas
BSE SENSEX S&P CNX CMP: INR1,495 TP: INR1,710 (+14%) Buy
75,449 22,908
Focus on market share improvement
Volume to be prioritized over margins; growth to be higher than peers
We interacted with the management of Voltas (VOLT) to gain insights into current
demand trends, as well as its views on compressors, margins, market share, and more.
Bloomberg VOLT IN
Equity Shares (m) 331 Management believes that current demand trends for RAC remain strong, and its focus
M.Cap.(INRb)/(USDb) 494.7 / 5.7 will be on growing faster than its peers. While market share will be prioritized over
52-Week Range (INR) 1946 / 1032 margins, it aims to increase value engineering to save costs and protect margins,
1, 6, 12 Rel. Per (%) 17/-13/38 rather than opting for price hikes, which could impact margins. The government has
12M Avg Val (INR M) 2965
relaxed import norms for compressors above 2 tons (~10% of the industry's volumes)
Free float (%) 69.7
and the industry is awaiting approvals for compressors below 2 tons. We expect VOLT
to benefit from a strong start to the summer season and anticipate the UCP segment's
Financials & Valuations (INR b)
Y/E MARCH FY25E FY26E FY27E margin to be ~7.5% in 4QFY24. We reiterate Buy on the stock with a TP of 1,710 based
Sales 148.3 164.2 184.4 on SOTP.
EBITDA 10.9 13.0 15.6
Managing compressors for ongoing season; tie-up needed to set up
Adj. PAT 8.3 10.0 12.6
EBITA Margin (%) 7.3 7.9 8.5 capacity
Cons. Adj. EPS (INR) 25.1 30.4 38.0  Amid concerns over a decline in compressor imports from China during
EPS Gr. (%) 247.1 20.9 25.1 3QFY25, management has indicated that it has successfully managed the
BV/Sh. (INR) 198.9 223.0 253.4
situation for the ongoing summer season through alternate sources. It
Ratios
Net D:E (0.1) (0.1) (0.2) believes that the government will allow imports to continue until domestic
RoE (%) 12.6 13.6 15.0 capacities are sufficient to meet the demand.
RoCE (%) 13.6 14.3 15.0  VOLT had previously planned to set up compressor manufacturing capacity
Payout (%) 25.0 25.0 25.0
through a technological collaboration with a Chinese player; however, this
Valuations
P/E (x) 59.5 49.2 39.4 plan did not materialize. Under PLI 3.0, the company has announced
P/BV (x) 7.5 6.7 5.9 investments of ~INR2.6b to establish compressor capacity and is currently
EV/EBITDA (x) 45.0 37.3 30.7 evaluating potential partners for technological collaboration. If the demand
Div Yield (%) 0.4 0.5 0.6 for RAC continues to grow strongly, as seen in FY25, the company will need
FCF Yield (%) 0.8 1.8 2.1
to fast-track its plans.
 Recently, the government relaxed import norms for compressors of 2 tons
Shareholding pattern (%)
As On Dec-24 Sep-24 Dec-23 or more from China, but this accounts for only ~10% of the industry size. A
Promoter 30.3 30.3 30.3 notification is still awaited for compressors below 2 tons.
DII 34.6 37.5 37.2
FII 21.3 18.1 17.2
Strong RAC demand; focus on protecting market share
Others 13.8 14.2 15.3  Demand for RAC has started strong in the ongoing summer season of CY25,
FII includes depository receipts and the current inventory, along with the tie-up for compressors, will
Stock’s performance (one year) support the company's growth in 4QFY25. The competition is projecting
~30% YoY growth in 4Q, and the company aims to outperform its peers.
Voltas
Nifty - Rebased During Apr'24-Jan'25, the industry grew 30% YoY, while VOLT's RAC volumes
2,100 grew 35% YoY.
1,800
 There have not been material price increases since May-Jun'24. As a mass
category player, the focus will be on balancing revenues and profitability
1,500
(with an emphasis on higher volumes and absolute EBITDA). While some
1,200 peers have recently implemented price hikes due to cost inflation and rupee
900 depreciation, VOLT will evaluate whether a price hike is necessary. The
Jun-24
Mar-24

Sep-24

Dec-24

Mar-25

company will prioritize value engineering and internal cost-saving measures

over price hikes.

Sanjeev Kumar Singh - Research analyst ([email protected])

Research analyst - Mudit Agarwal ([email protected]) | Abhishek Sheth ([email protected])
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
 Voltas

 Although there was some market share loss in Jan'25, it remains better on a YTD
basis. VOLT traditionally has a lower market share in 4Q. The company is
working to recoup some of the lost market share and expects to see gains as the
Chennai plant ramps up production.
 The Chennai plant is currently operating at 40-45% capacity and is expected to
reach optimum levels in FY26. Its Pant Nagar, Uttarakhand plant is operating at
100% capacity (installed capacity is 1.5m units).
 Demand for air coolers grew 80-85% in 9MFY25. The company is aiming for 70-
80% YoY growth in the future and has made several strategic tie-ups. Demand
for commercial ACs remained strong throughout the year, with a 12-15% YoY
growth in 9MFY25. This segment is expected to record a 15-18% CAGR going
forward.

Competitive intensity and view on margins

 There is ample growth opportunity for all players, as current demand remains
strong in the South, North, and West markets. Inventory depletion is occurring
at a faster pace. VOLT is well-positioned to outperform peers in distribution
channels, insourcing, and servicing, which will help improve its market share.
 Copper prices have increased 10-11%, and some compressors are also being
sourced at higher prices this summer. The company is working to mitigate the
cost impact through value engineering rather than relying on price hikes. The
UCP segment's margin is expected to remain in the high single digits.
 Demand for commercial refrigerators remains better in 4Q; however, it is still on
the lower side. Margins are also expected to be lower than historical levels and
remain in single digits (lower than 8%-9%).

BG encashment for Qatar entity

 Volt informed the stock exchanges in Feb'25 of an expected financial loss of
INR4.0b due to an order passed by Qatar Court regarding the encashment of
bank guarantees for damages claimed by a party named Joint Venture of OHL
International, Spain, and Contrack (Cyprus).
 This order was passed by the lower court, and the company plans to appeal to
higher courts against this order. It will decide later whether any provision has to
be made for this amount but believes it has strong grounds and that the bank
guarantee should not be encashed.

View on VoltBeko
 VoltBeko had envisaged a target market share of 10% and EBITDA break-even by
FY26; however, this will be slightly delayed. The company has already achieved a
market share of ~15% in semi-automatic washing machines and has a presence
in automatic washing machines. Its products are available across various
geographies.

Valuation and view

 We expect a CAGR of 12%/20%/23% in Volt’s revenue/EBITDA/adj. PAT over
FY25-27. While we estimate the UCP segment’s margin to be in the high single
digits, higher volume growth could surprise positively. The company focuses on
absolute profitability, sales growth, and optimization of production facilities.
 We reiterate our BUY rating on the stock with an SoTP-based TP of INR1,710,
with 50x FY27E EPS for the UCP segment, 25x FY27E EPS for the PES and EMPS
segments, and INR22/sh for Voltbek.

19 March 2025 2
 FY16 4 5.6 FY16 25.2 0.4
FY16 28.3 28.1
FY17 6 33.8

19 March 2025
FY17 26.6 (6.1) FY17 30.5 20.9
FY18 7 14.4 FY18 28.5 7.2 FY18 32.3 5.9
FY19 6 -7.7 FY19 36.2 27.2 FY19 31.6 (2.2)
Story in charts

FY20 7 12.3 FY20 32.5 (10.3) FY20 40.7 29.1

FY21 6 -6.6 FY21 28.8 (11.3) FY21 42.2 3.6
FY22 7 6.3 FY22 24.7 (14.2)

EBITDA (INR b)
FY22 48.8 15.7
UCP revenue (INR b)

EMPS revenue (INR b)

FY23 6 -16.0 FY23 24.0 (2.7) FY23 64.7 32.6
FY24 5 -17.1 FY24 36.8 53.3 FY24 81.6 26.0
129.6
FY25E 11 FY25E 42.1 14.4 FY25E 99.7 22.2
Growth

Exhibit 5: EBITDA to grow 19%/20% in FY26/FY27E

YoY (%)
Growth
FY26E 13 19.2 FY26E 44.4 5.4 FY26E 113.1 13.4
Exhibit 1: UCP revenue CAGR of 14.5% over FY25-FY27E

Exhibit 3: EMPS revenue CAGR of 5.2% over FY25-FY27E

FY27E 16 20.0 FY27E 46.6 5.0
FY27E 130.7 15.6

Source: MOFSL, Company

Source: MOFSL, Company

Source: MOFSL, Company; Note: 1QFY25YTD

FY16 7.6 FY16 3.4 13.4
FY16 0.6 1.9
FY17 9.6 3.2 FY17 4.4 14.5
FY17 0.8
FY18 10.3 FY18 1.9 6.5 FY18 4.7 14.7

FY19 8.6 FY19 2.8 7.7 FY19 3.3 10.3

FY20 9.0 FY20 1.7 5.2 FY20 5.1 12.6

Exhibit 4: Margin to improve

FY21 8.5 FY21 0.3 0.9 FY21 5.8 13.8

UCP EBIT (INR b)

EMPS EBIT (INR b)

FY22 8.6 FY22 1.3 5.1 FY22 5.1 10.5

FY23 6.0 FY23 (0.6) (2.4) FY23 5.4 8.3

EBITDA margin (%)

FY24 3.8 FY24 (3.3) (8.9) FY24 6.9 8.5
FY25E 2.3 5.4
EBIT margin

FY25E 7.3 Exhibit 6: EBITDA margin to improve in FY26/FY27E FY25E 7.6 7.6
EBIT margin

FY26E 2.5 5.6

FY26E 7.9 FY26E 9.0 8.0
FY27E 2.7 5.8
Exhibit 2: Estimate UCP margin at ~8%-8.5% in FY26/FY27E

FY27E 8.5 FY27E 11.1 8.5

3
Voltas

Source: MOFSL, Company

Source: MOFSL, Company
Source: MOFSL, Company
 Voltas

Exhibit 7: Gross margin to improve Exhibit 8: RAC market share to be at ~20%-21%

Gross margins (%) RAC Market share (%)

28.5

29.8

28.7

26.1

27.5

26.2

25.7

22.3

21.4

23.3

24.1

24.8

21.1

21.4

22.1

23.7

24.2

25.2

23.4

21.6

22.1

21.1

20.5

20.5
FY16

FY17

FY18

FY19

FY20

FY21

FY22

FY23

FY24

FY25E

FY26E

FY27E
FY16

FY17

FY18

FY19

FY20

FY21

FY22

FY23

FY24

FY25E

FY26E

FY27E
Source: MOFSL, Company Source: MOFSL, Company

Exhibit 9: One-year forward P/E chart Exhibit 10: One-year forward EV/EBITDA chart
P/E (x) Avg (x) Max (x) EV/EBITDA (x) Avg (x) Max (x)
Min (x) +1SD -1SD Min (x) +1SD -1SD
128.0 50.0 47.1

98.0 117.6 40.0 37.5

76.5
68.0 30.0 28.8
49.7
20.1 36.4
38.0 46.1 20.0
22.9 14.6 14.1
8.0 10.0

Jul-19
Jun-16

Jun-21

Mar-15

May-17

May-22

Jun-24
Mar-15

Sep-17

Dec-18

Mar-20

Sep-22

Dec-23

Mar-25

Dec-15

Jan-18

Mar-20
Aug-16

Dec-20

Jan-23

Mar-25
Aug-21

Oct-23
Oct-18

Source: MOFSL, Company Source: MOFSL, Company

19 March 2025 4
 Voltas

Financials and valuations (Consolidated)

Income Statement (INR m)
Y/E March FY21 FY22 FY23 FY24 FY25E FY26E FY27E
Total Revenues 75,558 79,345 94,988 1,24,812 1,48,254 1,64,227 1,84,377
Change (%) -1.3 5.0 19.7 31.4 18.8 10.8 12.3
EBITDA 6,414 6,816 5,724 4,746 10,895 12,991 15,585
% of Total Revenues 8.5 8.6 6.0 3.8 7.3 7.9 8.5
Other Income 1,889 1,892 1,685 2,533 3,132 3,295 3,472
Depreciation 339 373 396 476 660 797 922
Interest 262 259 296 559 550 510 470
Exceptional Items 0 0 -2,438 0 0 0 0
PBT 7,702 8,076 4,278 6,244 12,817 14,980 17,665
Tax 1,804 1,913 1,709 2,377 3,294 3,850 4,540
Rate (%) 23.4 23.7 40.0 38.1 25.7 25.7 25.7
PAT 5,898 6,163 2,569 3,867 9,523 11,130 13,125
Change (%) 0.0 4.5 -58.3 50.6 146.2 16.9 17.9
Profit/(Loss) share of associates/JVs -610 -1,103 -1,207 -1,386 -1,254 -1,121 -597
Minority interest (MI) 37 19 12 -39 -39 -39 -39
PAT after MI 5,251 5,041 1,350 2,520 8,308 10,048 12,568
Change (%) 1.5 -4.0 -73.2 86.7 229.7 20.9 25.1
Adj. PAT after MI 5,251 5,041 3,788 2,394 8,308 10,048 12,568
Change (%) -5.1 -4.0 -24.8 -36.8 247.1 20.9 25.1

Balance Sheet
Y/E March FY21 FY22 FY23 FY24 FY25E FY26E FY27E
Share Capital 331 331 331 331 331 331 331
Reserves 49,603 54,665 54,190 57,874 65,464 73,435 83,490
Net Worth 49,934 54,996 54,521 58,205 65,795 73,765 83,821
Minority Interest 361 381 417 337 298 259 220
Loans 2,606 3,432 6,160 7,133 6,633 6,133 5,633
Deferred Tax Liability -558 -317 -303 176 176 176 176
Capital Employed 52,343 58,492 60,794 65,851 72,902 80,334 89,851
Gross Fixed Assets 6,690 7,020 8,826 9,533 13,708 16,708 18,708
Less: Depreciation 3,534 3,906 4,302 4,778 5,439 6,235 7,157
Net Fixed Assets 3,157 3,114 4,524 4,754 8,269 10,473 11,551
Capital WIP 88 593 983 3,675 2,500 1,500 1,500
Investments 30,464 36,154 31,086 35,083 34,828 34,707 35,110
Goodwill 723 723 723 723 723 723 723
Curr. Assets 51,565 56,440 65,119 75,709 90,834 1,04,106 1,20,874
Inventory 12,796 16,614 15,920 21,354 25,183 27,896 31,319
Debtors 18,009 21,097 21,919 25,328 30,085 33,326 37,415
Cash & Bank Balance 4,588 5,717 7,084 8,523 11,211 15,905 21,851
Loans & Advances 23 32 6 13 16 18 20
Other current assets 16,149 12,981 20,191 20,491 24,340 26,962 30,270
Current Liab. & Prov. 33,654 38,532 41,640 54,093 64,253 71,175 79,908
Creditors 24,645 29,421 30,126 38,557 45,799 50,733 56,958
Other Liabilities 9,009 9,111 11,514 15,536 18,454 20,442 22,950
Net Current Assets 17,911 17,908 23,479 21,616 26,581 32,931 40,966
Application of Funds 52,343 58,492 60,794 65,851 72,902 80,334 89,851

19 March 2025 5
 Voltas

Financials and valuations (Consolidated)

Ratios
Y/E March FY21 FY22 FY23 FY24 FY25E FY26E FY27E
Basic (INR)
Adj EPS 15.9 15.2 11.5 7.2 25.1 30.4 38.0
Cash EPS 16.9 16.4 12.6 8.7 27.1 32.8 40.8
Book Value 150.9 166.3 164.8 176.0 198.9 223.0 253.4
DPS 5.0 5.5 4.3 2.2 6.3 7.6 9.5
Payout (incl. Div. Tax.) 31.5 36.1 37.1 30.0 25.0 25.0 25.0
Valuation (x)
P/E 94.2 98.1 130.6 206.6 59.5 49.2 39.4
Cash P/E 88.5 91.4 118.2 172.4 55.2 45.6 36.7
EV/EBITDA 76.8 72.2 86.3 103.9 45.0 37.3 30.7
EV/Sales 6.5 6.2 5.2 4.0 3.3 3.0 2.6
Price/Book Value 9.9 9.0 9.1 8.5 7.5 6.7 5.9
Dividend Yield (%) 0.3 0.4 0.3 0.1 0.4 0.5 0.6
Profitability Ratios (%)
RoE 10.5 9.2 6.9 4.1 12.6 13.6 15.0
RoCE 11.6 10.9 6.9 6.4 13.6 14.3 15.0
RoIC 26.9 29.6 14.1 11.9 28.3 30.5 33.1
Turnover Ratios
Debtors (Days) 87 97 84 74 74 74 74
Inventory (Days) 62 76 61 62 62 62 62
Creditors. (Days) 119 135 116 113 113 113 113
Asset Turnover (x) 1.4 1.4 1.6 1.9 2.0 2.0 2.1
Leverage Ratio
Net Debt/Equity (x) (0.0) (0.0) (0.0) (0.0) (0.1) (0.1) (0.2)

Cash Flow Statement

Y/E March FY21 FY22 FY23 FY24 FY25E FY26E FY27E
PBT before EO Items 7,735 5,610 7,787 10,207 12,817 14,980 17,665
Add : Depreciation 339 3,726 396 476 660 797 922
Interest 262 259 296 559 550 510 470
Less : Direct Taxes Paid (693) (2,169) (1,656) (2,115) (3,294) (3,850) (4,540)
(Inc)/Dec in WC (1,580) (438) (3,836) 801 (2,278) (1,656) (2,089)
CF from Operations 6,063 6,988 2,987 9,928 8,456 10,781 12,428
Others (502) (1,145) (1,393) (2,312) (1,510) - -
CF from Oper. Incl. EO Items 5,561 5,842 1,594 7,615 6,946 10,781 12,428
(Inc)/Dec in FA (208) (482) (1,799) (2,931) (3,000) (2,000) (2,000)
Free Cash Flow 5,353 5,361 (206) 4,685 3,946 8,781 10,428
Investment in liquid assets (2,645) (3,165) 983 (2,293) 510 (1,000) (1,000)
CF from Investments (2,853) (3,646) (816) (5,224) (2,490) (3,000) (3,000)
(Inc)/Dec in Debt 425 918 2,728 974 (500) (500) (500)
Less : Interest Paid (271) (312) (349) (493) (550) (510) (470)
Dividend Paid (1,358) (1,676) (1,829) (1,432) (718) (2,077) (2,512)
CF from Fin. Activity (1,204) (1,070) 550 (952) (1,768) (3,087) (3,482)
Inc/Dec of Cash 1,504 1,126 1,328 1,439 2,688 4,694 5,946
Add: Beginning Balance 3,084 4,591 5,756 7,084 8,523 11,211 15,905
Closing Balance 4,588 5,717 7,084 8,523 11,211 15,905 21,851

Investment in securities market are subject to market risks. Read all the related documents carefully before investing.

19 March 2025 6
 Voltas

Explanation of Investment Rating

Investment Rating Expected return (over 12-month)
BUY >=15%
SELL < - 10%
NEUTRAL < - 10 % to 15%
UNDER REVIEW Rating may undergo a change
NOT RATED We have forward looking estimates for the stock but we refrain from assigning recommendation
*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall be within following 30 days take
appropriate measures to make the recommendation consistent with the investment rating legend.
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1 MOFSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.
2 MOFSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company
3 MOFSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months
4 MOFSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report
5 Research Analyst has not served as director/officer/employee in the subject company
6 MOFSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
7 MOFSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months
8 MOFSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months
9 MOFSL has not received any compensation or other benefits from third party in connection with the research report
10 MOFSL has not engaged in market making activity for the subject company
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The associates of MOFSL may have:
- financial interest in the subject company
- actual/beneficial ownership of 1% or more securities in the subject company at the end of the month immediately preceding the date of publication of the Research Report or date of the public appearance.
- received compensation/other benefits from the subject company in the past 12 months
- any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the specific recommendations
made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even though there might exist an inherent conflict of interest in
some of the stocks mentioned in the research report.
- acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
- be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as
an advisor or lender/borrower to such company(ies)

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- received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.
- Served subject company as its clients during twelve months preceding the date of distribution of the research report.

The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report
Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not consider demat accounts
which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from clients which are not considered in above disclosures.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or
will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
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recipient. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this
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suitable for all investors. Certain transactions -including those involving futures, options, another derivative products as well as non-investment grade securities - involve substantial risk and are not suitable
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Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. This information is subject to change
without any prior notice. The Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their
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