Voltas slips 8%, hits lowest level since January 2021 on demand concerns

Shares of Voltas hit a 52-week low of Rs 883.20 on the BSE as they slipped 8 per cent in Friday's intra-day trade amid concerns that te July-September quarter (Q2FY23) may see subdued sales numbers due to low seasonal demand. With today's intra-day decline, the stock has corrected 35 per cent from its 52-week high level of Rs 1,357 touched on October 19, 2021.

The stock of the company, which is a global air conditioning and engineering services provider of the Tata Group, has fallen below its recent low of Rs 923.50, touched on May 16, 2022. It traded at its lowest level since January 2021.

At 03:05 PM, Voltas was down 5 per cent at Rs 914, as compared to 1.9 per cent decline in the S&P BSE Sensex.

With a broad and strong product portfolio – involving unitary products, engineering products and engineering projects – Voltas is also present in the white goods market through its joint venture (Voltbek) with Arcelik. The Company's wide range of offerings in the unitary product segment includes Room air conditioners, air coolers, water dispensers, water coolers, commercial refrigeration and commercial air-conditioning products.

For April-June quarter (Q1FY23), Voltas had reported a 10.47-per cent year-on-year (YoY) decline in its consolidated net profit at Rs 110 crore, due to higher raw material cost. However, its revenue from operations had increased 55 per cent YoY to Rs 2,768 crore led by 125 per cent growth in the unitary cooling products (UCP) segment. Strong demand of cooling products helped drive volume growth. Electro·Mechanical Projects and Services (EMPS) segment disappoints with lower revenues in Q1.

"EBITDA margin, too, declined 121 bps YoY to 6.4 per cent dragged by high raw material costs and increased advertisement spends. EBIT margin of unitary cooling products (UCP) dipped 457 bps to 7.7 per cent on the back of the volume growth.
However, structural demand owing to changing consumer lifestyle (work from home) post pandemic is likely to drive near term demand for RAC," according to analysts at ICICI Securities.

On a long term basis, the brokerage firm believes rising income and aspirations of middle class household in India will be a key demand driver for cooling products. "AC's penetration at 7 per cent is lowest among white goods segment. Higher demand for energy efficient products would help drive premiumisation in the air conditioner industry," it said.

While, the management expects demand in Q2FY23 to be subdued for cooling products due to low seasonal demand, it expects a pick-up in demand with the start of the festive season in India, the brokerage firm added.

"Voltas continues to undertake various cost reduction steps and value engineering processes to improve margins. The BEE labelling program and Voltas Beko initiative are expected to provide additional revenue. Risk mitigation initiatives and enhanced order books in the EMP vertical may act as tailwinds for growth in the coming quarters," analysts at Geojit Financial Services said in result update.