Voltas hits new high, soars 7% on hopes of demand recovery

The stock has rallied nearly 25 per cent in the last eight trading sessions hoping for demand to pick up ahead of the festive season and short summer in West India

Shares of Voltas hit a new high at Rs 1,199.95, soaring 7 per cent on the BSE in intra-day trade on Tuesday. The stock of Tata Group company was quoting higher for the eight straight day and has rallied 25 per cent during this period on expectation of demand recovery ahead of the festive season and short summer in West India.

Voltas, with its proud Tata legacy, is India’s undisputed leader in cooling products and the No. 1 room air conditioner (RAC) brand. The company is also an engineering solutions provider and a project specialist.

The Indian government’s decision to make India a global manufacturing hub for ACs under its ‘Atmanirbhar Bharat’ initiative coupled with the much-awaited production-linked incentive (PLI) scheme for white goods are the two definite positive catalysts for the stock.

In the April-June 2021 quarter (Q1FY22), the group’s operations and financial results were impacted due to outbreak of the second wave of COVID-19 pandemic during the peak season, with lockdowns and restricted operational hours post easing of state-wide lockdowns.

Gain in market share in the RAC segment and a superior margin profile have been the key execution strengths of Voltas, which analysts at Emkay Global Financial Services expect to sustain. The improvement in product mix in RACs has been favorable for margins while higher promotional spending in Q1 impacted the segment’s margins, the brokerage firm said in its Q1 result update.

“As regional lockdowns are being lifted, demand recovery is already visible. Unlike last year, we do not see large benefits coming from pent-up demand barring the cooling products, which can see some revival in its second summer season. We see improving housing activities and resumption of capex to sustain strong revenue traction in the coming quarters. Leading companies have already taken price hikes to pass on most of the costs, however continued raw material inflation remains a concern,” HDFC Securities said in a consumer durables sector update.

Meanwhile, with an emphasis on sustained profitable growth and the need for increased focus on business-to-consumer (B2C) and business-to-business (B2B) verticals, the company's board has approved the transfer of its domestic project business relating to MEP / HVAC and Water projects, M&CE (Mining & Construction Equipment) business and TMD (Textile Machinery Division) to its wholly-owned subsidiary Universal MEP Projects & Engineering Services Limited (‘UMPESL’) (formerly known as Rohini industrial Electricals Limited), by slump sale. A Business Transfer Agreement (BTA) was executed on 24 March, 2021 and the transaction is expected to be completed by September 2021.

At 01:28 pm; Voltas was trading 5 per cent higher at Rs 1,180 on the BSE, as compared to a 0.37 per cent rise in the S&P BSE Sensex. The trading volume at the counter jumped nearly two-fold with a combined 6.08 million equity shares changing hands on the NSE and BSE.