- 02 Nov 2022
- ICICIdirect Research
VOLTAS REPORTS MIXED BAG PERFORMANCE IN Q2FY23
VOLTAS - 1688 Change: -32.95 (-1.91 %)News:
Voltas reported revenue growth of ~5% YoY to Rs 1768 crore. On the segment front, the UCP segment revenues increased ~4% to Rs1048 crore. Electro-mechanical projects & services (EMPS) revenues increased ~3% YoY to Rs 554 crore. Engineering Products & Services (EPS) revenues increased ~9.5% YoY to Rs 137 crore. Unitary cooling product (UCP) segment reported a muted topline growth owing to unfavorable base, extended monsoon and lower consumer discretionary spends in the starting of the quarter. Muted EMPS segment revenue growth is attributable to slower order execution in Q2. EBITDA margin of the company declined 194 bps YoY to 5.7% (I-direct estimate of 7.1%) due to use of high-cost inventory (resulting in ~219 bps YoY fall in gross margin). The company reported a net loss of Rs 6 crore as a result of one-time exceptional item amounting to Rs 106 crore as well as loss of ~Rs 29 crore from joint ventures and associate companies
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We believe Voltas' UCP sector performance was negatively impacted by the prolonged monsoon, weaker discretionary spending, and a delay in price hikes on account of the increased competitiveness. With an exit market share of 22.8% as of August 2022, Voltas continued to dominate the market for room air conditioners. The company has made a provision of Rs 106.4 crore for an exceptional item related to the EMPS segment. This pertains to unilateral cancellation of an overseas project by the main contractor. As a result, the company reported a loss of Rs 6 crore in Q2FY23. We await management commentary on RAC demand and margin outlook, going forward
Impact:
Negative