Hold Voltas, target price Rs 545: HSBC

HSBC has downgraded Voltas to hold from buy and cut target price to Rs 545 from Rs 735. The stock ended up 5.6 per cent at Rs 509.35 on Thursday while the BSE Sensex closed 1265.66 points up (+4.23 per cent) at 31,159.62.

Voltas, incorporated in 1954, has a market cap of Rs 16853.61 crore.

Investment Rationale


Slowing economic growth has had a significant impact on the growth outlook for durables, even for low-penetrated categories such as room ACs, said HSBC. The brokerage believes Voltas’s room AC segment volume growth and the profitability of its projects business will likely be volatile and could disappoint even the lowered numbers over the next two years.

Financials

Voltas' key products/revenue segments include Electrical Goods which contributed Rs 3631.08 crore to sales value (54.25 per cent of total sales); Contract Revenue which contributed Rs 2483.72 crore to sales value (37.10 per cent of total sales); Sale of services which contributed Rs 543.48 crore to sales value (8.11 per cent of total sales); Other Operating Revenue which contributed Rs 29.26 crore to sales value (0.43 per cent of total sales) and Scrap which contributed Rs 5.65 crore to sales value (0.08 per cent of total sales) for the year ending March 31, 2019.

For the quarter ended December 31, 2019, the company reported consolidated sales of Rs 1487.07 crore, up 5.09 per cent from last quarter sales of Rs 1415.02 crore and up .22 per cent from last year same quarter sales of Rs 1483.85 crore. The company reported net profit after tax of Rs 106.68 crore in the latest quarter.