Voltas: Upbeat performance of AC business in Q2VOLTAS - 840 Change: -5.05 (-0.60 %)
Voltas reported a strong unitary cooling products (UCP) division sales growth of 34% YoY supported by strong demand and market share gains.
Context: Voltas’s UCP division sales growth of 34% YoY to Rs.1007 crore in Q2FY22 was much ahead of I-direct estimates. This was largely led by a strong volume growth of 19% YoY. We believe rising work from home culture, festive demand and relaxation from Covid-19 restrictions have helped drive such high volume growth. Overall topline growth at 5% YoY was slightly lower than I-direct estimate due to 28% revenue decline in project business. On the margin front, with stable gross margin and cost optimisation helped EBITDA margin to scale up by 160 bps YoY to 7.6%. Significant cost savings in the project business helped drive segment profitability. However, PAT increased 31% YoY to Rs.104 crore despite losses from JVs/associates.
We believe despite a higher base and low seasonal demand, the 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 market share of 25.9% (YTD till August 2021). We believe changing consumer behaviour along with upcoming festive and second summer would continue help drive Voltas’s UCP segment sales in H2FY22. We believe revival in the real estate sector will help drive incremental demand of air conditioners.