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Voltas:Strong AC segment sales: maintaining leadership position with 25.9% market share

News: Voltas’ consolidated topline grew by ~5% YoY to ~ Rs.1689 crore (Vs I-direct estimate: 9% YoY to ~Rs.1759 crore) supported by a strong performance of UCP division. Company’s UCP division sales increased by ~34% YoY to Rs. 1007 crore (Vs I-direct estimate:Rs.787 crore) led by a volume growth of 19% in the RAC volume. We believe, rising work from home culture, festive demand and relaxation from Covid-19 restrictions have helped drive volume growth in Q2FY22. Overall EBITDA margin of the company increased by 157 bps YoY to 7.6% better than I-direct estimate of 5.4%. This was largely due to improved profitability from EMPS division. EMPS segment EBIT increased from Rs.0.5 crore in Q2FY21 to ~ Rs.11 crore in Q2FY22. However, UCP segment EBIT margin declined by 130 bps YoY to 10%. Despite increased losses from JV at Rs.19 crore, PAT increased by ~31% YoY to ~Rs.104 crore (Vs I-direct estimate: Rs.83 crore) mainly tracking strong revenue growth and margin expansion.

Views: We believe, despite a higher base and low seasonal demand, company’s UCP division sales growth of 34% is much better than its peers. Voltas continues to be the market leader in the room AC segment with YTD (till June’21) market share of 25.9% (YTD till Aug’21). We believe, changing consumer behaviour along with upcoming festive and summer seasons would continue help drive Voltas’s UCP segment sales in H2FY22. We would await management commentary on future demand outlook and price hikes to mitigate higher raw material prices. The detailed Q2FY22 result update will be released post con-call