Why do analysts expect Voltas' demand to recover in second half of FY26?

Analysts highlighted elevated channel inventory, delayed consumer purchases, and a weak summer season as key challenges for the quarter for Voltas.

Voltas Limited, India’s leading air conditioning and engineering solutions company, is expected to see a recovery in demand in the second half of FY26 (H2FY26), driven by Goods and Services Tax (GST) rate cuts and the festive season, even as September quarter (Q2) sales remain subdued, analysts said. 

 

Analysts highlighted elevated channel inventory, delayed consumer purchases, and a weak summer season as key challenges for the quarter.

 

In a pre-quarterly update and subsequent analyst interactions, Voltas’ management acknowledged that the room AC (RAC) segment has been under pressure, with both primary and secondary demand severely impacted in Q2FY26. According to Nomura, “elevated channel inventory of 2-3 months, the extended monsoon season, and deferred consumer purchases between August 15 and September 22 have weighed on sales.”

 

Emkay noted a similar pattern, saying that “sharp seasonal reversal, with persistent monsoons this year compared to an unusually intense summer last year, has created a base-effect mismatch, while elevated channel inventories continue to weigh on both primary and secondary sales.” 

Recovery eyed

 

Despite these challenges, analysts expect a recovery in the second half of the fiscal year, spurred by festive demand and the recent reduction in GST on RACs, commercial ACs, and dishwashers from 28 per cent to 18 per cent. Motilal Oswal highlighted that Voltas “expects near-term challenges due to a weak summer season and higher channel inventory. However, we are confident of a pickup in demand momentum in H2FY26, supported by the festive season, GST rate reduction, pent-up demand due to the weak summer, and pre-buying ahead of new BEE norms.”

 

The upcoming Bureau of Energy Efficiency (BEE) rating changes, set to be implemented from January 2026, are likely to increase prices for ACs, potentially prompting early purchases. Nomura noted that new ratings are expected to drive prices higher by 3-5 per cent for 3-star ACs and more than 5 per cent for 5-star ACs, with timing of production adjustments likely decided by end-October depending on demand recovery.

 

While the short-term demand is subdued, analysts stressed Voltas’ market leadership and diversified portfolio as key levers for sustainable growth. The company retains the #1 position in the RAC market with approximately 18 per cent share, according to Emkay, and continues to expand its offerings in commercial ACs, EMPS, washing machines, and textile & machining segments.

 

In terms of profitability, brokerages noted that margins could remain under pressure in the near term due to continued channel support and competitive pricing, particularly as the company navigates the current weak quarter. Nomura expects Ebit margins for unitary cooling products to be “7.7 per cent, 9.0 per cent, and 9.0 per cent over FY26-28F” while pointing out that aggressive discounting might be needed to regain market share amid rising competition. 

Analysts split on valuation 

 

Valuation views, however, differ. Nomura and Motilal Oswal maintain a ‘Neutral’ rating on the Voltas stock with target prices of ₹1,317 and ₹1,350, respectively. Emkay remains bullish with a ‘Buy’ rating and a revised target of ₹1,500 (from ₹1,450). Nuvama is more cautious, maintaining a ‘Reduce’ rating with a target of ₹1,070. Analysts generally agree that the market has already priced in a recovery scenario, making short-term upside limited.

 

The consensus among analysts is that while Voltas faces near-term headwinds, the combination of GST-led price cuts, festive demand, and pre-BEE re-stocking should provide a boost in Q3 and Q4. The company’s focus on premium offerings, channel expansion, and cost efficiencies is expected to support market share gains and profitability over the medium term.