Voltas Maintains Buy Recommendation with Price Target of Rs 1308: Prabhudas Lilladher

Voltas' Profitability Remains Under Pressure in FY26

Prabhudas Lilladher's research report on Voltas reveals that the company's UCP EBIT margins remained under pressure in FY26, standing at 3.2% compared to 8.4% in FY25. This decline is attributed to commodity inflation, currency depreciation, and continued investments in branding and marketing. However, management expects progressive margin improvement going ahead, supported by calibrated price hikes, cost optimization initiatives, improved manufacturing utilization at Chennai and Pantnagar facilities, deeper localization, and operating leverage.

The company has implemented price hikes for its RACs, with a 5% increase for 3-star models and a 10% increase for 5-star models, along with an additional 2-3% increase to offset higher raw material costs. Voltas has maintained its leadership in the RAC segment with a market share gap of approximately 5.1% versus its nearest cluster of four competitors, reflecting strong brand positioning and distribution strength. The company achieved RAC sales volume of approximately 2.25 million units in FY26.

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Voltbek, a subsidiary of Voltas, has strengthened its position in home appliances with a YTD market share of 6.2% in refrigerators and 8.6% in washing machines, supported by premiumization, localization at the Sanand facility, expanded channel reach, and new product launches.

Outlook and Recommendations

We have downward revised our FY27E/FY28E earnings by 24%/13% due to continued margin pressure, higher promotional spends, and slower ramp-up of the Chennai plant. We estimate FY26-28E revenue/EBITDA/PAT CAGR of 19.2%/44.7%/60.0%. Our SOTP-based target price has been revised to Rs1,308 (earlier Rs1,423), implying a PE of 42x FY28E. As a result, we have downgraded our recommendation for Voltas to 'HOLD' from 'Accumulate'.