Credit Suisse downgrades Voltas stock to underperform

Mumbai: Credit Suisse has downgraded air conditioning and engineering services company Voltas to underperform and cut the target price to ₹975 from ₹1,225, citing the company's high dependence on high-temperature weather, intensely competitive category and relatively expensive sector valuation. Shares of Voltas ended down 5% at ₹989.35 on Tuesday.

The foreign brokerage said market share losses to aggressive competitors may not be limited to the southern region and the company could continue to face margin pressure.

"Voltas had re-rated and reached sector high valuation (ahead of Havells as well) on strong performance," said Credit Suisse.

"Aggressive competition and lack of seasonal support a month later can drive incremental downside. Temperatures, while still high, are drifting back to the normal seasonal range," the brokerage said, cutting earnings estimates for 2023 and 2024 by 10% and 13%.

Voltas reported a 23.46% decline in its consolidated net profit for the March quarter at ₹182.71 crore.

The Tata Group company's total income for the quarter stood at ₹2,703.78 crore, up 0.76% from the same period in the previous financial year.

The company's revenue from unitary cooling products for comfort and commercial use rose 9.89%

Other brokerages have lowered the target price on Voltas. Centrum Broking has retained an add rating and cut the target price by 9.8% to ₹1,155. The brokerage believes that pricing aggression by peers could force Voltas to defend its leadership and impact its margin structure.

HDFC Securities has cut the target price to ₹1,150 from ₹1,325 while maintaining an add rating.