Voltas tanks 10% on disappointing March quarter results

Shares of Voltas slipped 10 per cent to Rs 1,045 on the BSE in Friday’s intra-day trade after the company reported a weak set of numbers for March quarter (Q4FY22), with 24 per cent year-on-year (YoY) decline in consolidated net profit at Rs 183 crore mainly due to losses from joint ventures (JVs). The global air conditioning and engineering services provider of the Tata Group had regsitered a profit of Rs 239 crore in the year-ago quarter.

At 11:16 AM, the stock was down 7 per cent at Rs 1,073, as compared to 1.5 per cent decline in the S&P BSE Sensex. It had hit a 52-week low of Rs 953.95 on May 17, 2021.

Voltas reported a flattish revenue growth of 1 per cent YoY to Rs 2,667 crore led by 13 per cent YoY growth in the revenue of unitary cooling products (UCP) division. However, sharp fall in Electro-Mechanical Projects and Services (EMPS) segment revenue restricted the overall growth of the company. The EBITDA margin declined by 268 bps YoY to 9.8 per cent on account of higher raw material cost and delay in price hikes.

The company said the extended winter coupled with spread of third wave of mutant (omicron) during January / February 2022 affected the trade and consumer sentiments resulting in lower primary offtake of cooling products by channel partners. However, the hot weather turned the market outlook in March 2022 resulting in partial sales recovery for the quarter, the company said.

ICICI Securities believes, lower than expected performance of Voltas in Q4FY22 is attributable to lower revenues from the EMPS segment and higher raw material costs. On the UCP front, we believe the revenue growth came largely through price hikes (YTD price hike of ~15 per cent) whereas volumes offtake was impacted by higher base and extended winter. Voltas continues to be the market leader in the room AC segment with YTD (till January’22) market share of 25.4 per cent.

The brokerage firm believes, rising demand (due to intense heatwave across the country) and hybrid work model (i.e. change in lifestyle) would continue help drive Voltas’s UCP segment sales in FY23. However, we await management commentary on price hikes to mitigate higher raw material prices.

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Technical View

Bias: Negative

Target: Rs 986

Downside: 8.6%

The stock gave a sharp breakdown on the weekly charts on Friday. As per the weekly charts, the bears are likely to have the upper hand as long as the stock trades below Rs 1,120. On the downside, the stock can slide towards Rs 986 - its 100-WMA (Weekly Moving Average)

Similarly, on the daily charts, the stock had given a sell signal on May 04 following the 7 per cent fall.  

Apart from the Slow Stochastic, the key momentum oscillators on the daily chart are strongly in favour of the bears. The DI (Directional Index), in paticular, indicates the bearish bias to continue for now.

The price-to-moving averages action is also likely to turn bearish, with the 20-DMA, placed at Rs 1,252, seen converging towards the 50-DMA at Rs 1,243. As and when the 20-DMA dips below the 50-DMA, the trend will turn sour for the stock.

(With inputs from Rex Cano)