Brokerages cut EPS estimates, downgrade Voltas on weak RAC demand outlook

According to JM Financial, Voltas and the overall RAC industry saw a 20-25 per cent year-on-year (Y-o-Y) volume decline in April and May, primarily due to unseasonal weather.

Brokerages have turned cautious on room air conditioner (RAC) market leader Voltas, downgrading the stock and cutting 2025-26 (FY26) RAC and 2026-27 (FY27) earnings estimates. While the company posted strong January-March quarter (Q4) and full-year 2024-25 (FY25) performance, multiple near-term headwinds have led to the downgrades.

 

On the bourses, Voltas shares fell up to 2.39 per cent to hit an intraday low of ₹1,261.65 per share on Wednesday. It ended the day at ₹1,289, almost unchanged from the previous close. In a recent analyst meeting, the management flagged a sharp slowdown in the RAC segment during the ongoing first quarter (Q1) of FY26. According to JM Financial, Voltas and the overall RAC industry saw a 20–25 per cent year-on-year volume decline in April and May, primarily due to unseasonal weather.

 

While a modest recovery is underway in June, the brokerage expects Q1 to remain weak. It added that the margin outlook for the unitary cooling products (UCP) segment remains under pressure and has not yet bottomed out. Other segments, including commercial ACs and refrigeration, are also facing industry headwinds, while the electro-mechanical projects (EMP) business has seen limited traction outside a few Tata Group orders. 

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Given this, JM Financial has cut its FY26 and FY27 earnings per share estimates by 12–14 per cent and downgraded the stock to ‘hold’ from ‘buy’, with a revised sum-of-the-parts target price of ₹1,300.

 

Motilal Oswal echoed similar concerns after Voltas’ business update. The brokerage highlighted a major dip in RAC volumes across the industry, as well as for Voltas, during April and May. However, it noted a pickup in June demand, especially in North India, which contributes nearly 35–40 per cent of Voltas’ revenues. The brokerage also flagged elevated channel inventory levels of six to eight weeks and ongoing promotional offers like free installation and extended warranties being used to push sales. 

 

While Voltas remains focused on maintaining or improving market share and achieving high single-digit UCP margins, Motilal Oswal sees continued weakness in the international EMP segment and only a gradual recovery in domestic orders. It revised the FY26/FY27 earnings estimates lower by 8 per cent and 5 per cent, respectively, and retained its ‘hold’ rating with a revised target price of ₹1,190 (₹1,250 earlier).

 

Japan-based Nomura, meanwhile, maintained its ‘neutral’ rating and flagged rising competition and aggressive pricing as margin risks for Voltas. The brokerage acknowledged a moderate rebound in June but warned that it may not be enough to offset the impact of weak sales in April and May. Nomura projects 10 per cent and 21 per cent volume growth for UCP in FY26 and FY27, respectively, but expects margin headwinds to persist due to higher discounting and cost pressures from backward integration. It estimates muted performance in the project business as well and values the stock at a target price of ₹1,290.

 

In Q4 and FY25, the company posted strong results. Net profit for Q4FY25 more than doubled to ₹236 crore, while annual profit surged to ₹834 crore from ₹248 crore in 2023-24. The UCP segment volumes grew 36 per cent in FY25, with certain categories like air coo­lers growing over 70 per cent. Revenues from the EMP business rose 13 per cent year-on-year, and losses narrowed considerably due to impr­oved execution and order flows. However, the company’s engineering products and services segment continued to face challenges.

 

While the long-term growth story for air conditioning in India remains intact due to low penetration levels, brokerages appear to be taking a wait-and-watch approach, citing a weak start to FY26 and macro uncertainties.