Target: ₹1,505
CMP: ₹1,477.25
We attended the investor update call of Voltas, where they highlighted the the worst for RAC in terms of demand is behind and there will be sequential improvement in Q3 and Q4. The channel inventory for RAC continues to remain high; company is confident of sustaining RAC market share and further improve upon; near-term margin is expected to remain under pressure from high RM inflation and additional support to the channel partners to clear off the inventory; domestic EMPS business continues to remain strong with steady profitability.
We believe the worst in terms of RAC demand is behind; however, UCP margins are expected to remain at lower levels, given the continued additional support given to channel partners and high RM inflation. Voltas is yet to formulate a pricing strategy for the new BEE-rated products. Voltbek is very close to becoming market leader in semi-automatic washing machines with high single-digit margins in other product categories.
We continue to remain neutral on the stock with an SoTP-based PT of ₹1,505, rolling forward our target multiple to FY28. We will turn positive once we see sustained demand and an easing of competition.