- 03 Aug 2022
- ICICIdirect Research
Higher raw material prices hit EBITDA margin of VoltasVOLTAS - 833 Change: -12.05 (-1.43 %)
News: Voltas reported ~55% YoY increase in revenue to Rs 2768 crore. The UCP segment revenues increased by 124%, the Engineering Products & Services (EPS) segment revenues increased by 8.1% YoY, and the EMPS segment revenues declined by 34% YoY due to low carry forward orders. Sales of the company's Unitary Cooling Product (UCP) segment rose by 124 % YoY to Rs 2162 crore, driven by a spike in demand for cooling products in Q1FY23 because of the exceptionally hot summer in India. In this segment, volume offtake increased by 111% YoY. On a three-year basis, volume grew at CAGR of 9%. The company's overall EBITDA margin declined by 121 bps YoY to 6.4% dragged by high raw material costs. The PAT decreased by ~11% YoY to Rs 110 crore, tracking lower EBITDA margin and JV losses of Rs 31 crore.
Views: We believe Voltas' weaker than expected performance in Q1FY23 was caused by the EMPS segment's poor performance and delay in passing on price hikes in the UCP segment. Voltas' exit market share for room air conditioners increased to 24.1% from 23.4% in Q4FY22. We believe aggressive pricing, new product launches, and higher promotional activities would have helped the company reclaim its market share. We await management commentary on margin outlook, going forward.