Emkay Global Sets Price Target of Rs 1500 for Voltas Stock

Voltas Posts Weak Q4, But Management Expects Gradual Recovery in FY27

Voltas, a leading Indian consumer electronics and air conditioning company, has reported a weak fourth quarter (Q4) with revenue at Rs48.9 billion, a mere 3% year-over-year (YoY) increase. The company's earnings before interest, taxes, depreciation, and amortization (EBITDA) margin (EBITM) also disappointed, coming in at 5%, which missed Emkay Global Financial's estimate of approximately 7.8%. In comparison, rival company BLSTR posted an EBITM of 10.4% in Q4.

Despite resilient demand for Voltas' Uninterruptible Power Supply (UCP) products, which increased by 1% YoY, the company's margins were impacted by commodity price inflation and currency devaluation. The company's other product segment (EMPS) grew approximately 6% YoY, but its segment margin was below Emkay's estimate at approximately 6.4%, down from 8.4% in the previous quarter (Q3FY26). The combination of flat growth, weaker margins, and higher-than-expected taxes led to a 52% year-over-year decline in the company's profit after tax (PAT).

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

For the fiscal year 2027 (FY27), the management of Voltas expects the company's UCP and overall earnings before interest, taxes, depreciation, and amortization margin (EBITDAM) to recover gradually through targeted price hikes. The company has already implemented price hikes of approximately 7-8% post-a change in the Bureau of Energy Efficiency (BEE) regulations and additional price hikes of 2-3% later in Q4 to factor in commodity price inflation prior to the Middle East crisis.

The company's outlook for the FY27 refrigerant air conditioning (RAC) demand is cautiously optimistic, given a decent start to the calendar year 2026 summers, although some regions experienced unseasonal rains. The management is holding a wait-and-watch stance, expecting industry growth of approximately 15-20% on a weak base.

Based on the weaker-than-expected UCP margin delivery and expectations of a gradual rebound in profitability to FY25 EBITDAM levels (approximately 8.4%), Emkay Global Financial has cut its earnings per share (EPS) estimates for FY27 and FY28 by approximately 18% and 11%, respectively. The company's share price target has also been reduced by 9% to Rs1,500 from Rs1,650. However, current valuations remain supportive, with the company's one-year forward implied UCP price-to-sales (P/S) trading at approximately 3.1x, near its -1 standard deviation (Covid lows of approximately 2.8x). Emkay retains a BUY rating for Voltas.