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Voltas: CMP: 1778: Sales Gr Long Term: 12% | Q1_fy25: 47%
(Sold record 10 Lakh AC this quarter with 21% Market share)
ABOUT COMPANY:
Voltas Limited is an Indian multinational home appliances company. It designs, develops, manufactures and sells products including air conditioners, air coolers, refrigerators, washing machines, dishwashers, microwaves, air purifiers, water dispensers. Voltas is India's largest air conditioning company by market share. The company was incorporated in 1954, as a collaboration between Tata Sons and Volkart Brothers. Introduced the first air-conditioner in India in 1954. To Developing and deploying cooling solutions for Rajdhani Express, India’s first high-speed train in 1969. From taking up the challenge to cooling Dubai’s Burj Khalifa – the tallest building in the world – to building Abu Dhabi’s F1 Yas Marina Grand Prix Circuit, to Singapore’s Thomson-East Coast Line – one of the world’s largest driverless rapid transit lines – Voltas have made their presence felt across regions.
Past:
Able to grow revenue and profits from 1200 Cr during the year 2003 to this year crossing the landmark 10,000 Cr. Revenue Grew by around 8X, & Profits by 20X while Price by 130X during the last 2 decades. Hence, investment of 1 lakh is already more than 1.2 Cr during the last 2 decades plus 25% dividend distributed should have refunded more than invested amount back. Infact today's annual dividend is equal to the invested amount. We have seen high consistent profits during the past few decades here. Not a single year of losses even during vulnerable times. We have been accumulating it for around a decade assuming AC would have better penetration. This industry has the potential to grow by 10-15% CAGR in coming times and leaders can have more business. During the year 2000 when the high poverty ratio of 45% was in India, we were low AC penetrated with around less than1%. The decreased poverty ratio from 45% to 22% helped increase the penetration from below 1% to near 8% and this decreasing poverty and increasing income should help the AC market even in future. We saw Indian AC market crossing 1 Cr ac last year.
Industry Overview:**
The air conditioning and cooling industry in India has been witnessing steady growth due to increasing urbanization, rising disposable incomes, and the growing need for energy-efficient cooling solutions. The industry is highly competitive, with several domestic and international players vying for market share. The engineering services sector, particularly in electro-mechanical projects, also plays a crucial role in infrastructure development, both domestically and internationally.
Peer Group Analysis:**
Voltas competes with companies like Blue Star, Lloyd, and Daikin in the air conditioning segment. Voltas' strong market leadership (20% Market share), especially in the unitary cooling products segment, gives it a competitive edge. The company’s diversified presence across various engineering services also helps mitigate risks associated with a single segment focus.
**Q1 FY25 Financial Analysis and Highlights**
Consolidated Financial Highlights (Q1 FY25):**
- **Total Income:** ₹5001 crores, a 46% increase from ₹3430 crores in Q1 FY24.
- **Profit Before Tax (PBT):** ₹452 crores, up by 123% from ₹203 crores in Q1 FY24.
- **Net Profit (PAT):** ₹335 crores, a significant rise of 160% from ₹129 crores in Q1 FY24.
#### **Segmental Revenue and Profit Growth:**
- **Unitary Cooling Products:**
- **Revenue:** ₹3802 crores, a 51% increase from ₹2514 crores in Q1 FY24.
- **Segment Result:** ₹327 crores, a 58% rise from ₹207 crores in Q1 FY24.
- **Volume Growth:** The segment saw a remarkable volume growth of 67%.
- **Electro-Mechanical Projects and Services:**
- **Revenue:** ₹949 crores, up by 40% from ₹679 crores in Q1 FY24.
- **Segment Result:** ₹68 crores, compared to a loss of ₹52 crores in Q1 FY24.
- **Engineering Products and Services:**
- **Revenue:** ₹161 crores, a slight increase from ₹142 crores in Q1 FY24.
- **Segment Result:** ₹45 crores, compared to ₹54 crores in Q1 FY24.
#### **Regional Revenue Growth:**
- **Domestic Projects:** Continued growth due to increased infrastructure spending and a healthy order book.
- **International Projects:** Positive performance in UAE and Saudi Arabia, driven by strong project execution and timely cost assessment.
#### **Profit Margin Comparison:**
- **Gross Profit Margin (Q1 FY25):** 9.64% compared to 4.99% in Q1 FY24.
- **Net Profit Margin (Q1 FY25):** 6.70% compared to 3.78% in Q1 FY24.
- **Comparison with Q4 FY24:** The profit margins have improved sequentially, indicating better cost management and higher sales.
#### **Profitability Ratios:**
- **Return on Equity (ROE):** Improved due to higher net profit.
- **Return on Capital Employed (ROCE):** Increased as a result of better operational efficiency.
#### **Earning Ratios:**
- **Earnings Per Share (EPS):** ₹10.10 in Q1 FY25, up from ₹3.91 in Q1 FY24.
#### **Leverage Ratios:**
- **Debt to Equity Ratio:** Remains stable, indicating a balanced capital structure.
- **Interest Coverage Ratio:** Improved significantly, reflecting better earnings before interest and taxes (EBIT).
#### **Valuation Ratios:**
- **Price to Earnings (P/E) Ratio:** Likely to be favorable given the strong earnings growth.
- **Enterprise Value to EBITDA (EV/EBITDA):** Expected to show improvement due to higher EBITDA.
#### **Near Term Estimates:**
We may see Voltas Sales grow this year by 25% & with 6.8% profit Margin the profit growth can shoot up by 325%. This can help Voltas reach the benchmark Sales & profits of 15000 Cr & 1000 Cr for the 1st time in the history. Hence those holding since long time can add more again during any fall near 1107 while 2 years target can be 2291 where some 5% profits can be booked.
#### **Future Outlook:**
Voltas is expected to continue its growth trajectory, driven by:
- Sustained demand in the air conditioning market.
- Expansion in infrastructure projects domestically and internationally.
- Strategic initiatives to enhance market share and operational efficiency.
We may see Voltas grow by 15% this decade. This can help Voltas cross the landmark turnover of 50000 Cr till fy_33. Overall we may see a multiyear rally along with high and consistent profits.
The company’s focus on innovation, cost management, and expanding its product portfolio is likely to bolster its market position further. However, the company must navigate challenges such as competitive pressures and potential delays in project execution.
Disclosure: Do not consider this document as recommendation, this was created for educational purposes.
