Voltas once again misses key summer sales

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Voltas Ltd saw another peak selling season affected by lockdowns due to a pandemic. The impact in the June quarter was less severe compared to the same period last year and year-over-year sales growth remained good. However, caution will prevail over profit growth in FY22 as the June quarter remains the most important quarter for sales of cooling products.

It’s no surprise that the stock also trended lower. While it has lost more than 10% since the June highs, it has fallen almost 5% in the last two trading sessions after the results.

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Muted performance

Net sales and EBITDA increased 38% and 103% year-on-year respectively in the June quarter thanks to last year’s low base. The numbers, however, lagged behind analysts’ estimates. Those of HDFC Securities Ltd forecast the company to post net sales and EBITDA growth of 69% and 250%, respectively.

Unit or UCP segment cooling sales increased 19% year-over-year. However, that was on the low base of last year when sales plunged 60%. The bright spot for Voltas is that UCP volume grew 10% year-on-year, outpacing weak single-digit industry growth. In addition, Voltas extended its market share to 26.7% at the end of June, against 25.6% at the end of February.

The pandemic also had an impact on the performance of the electromechanical projects and services segment. The segment recorded a 67% jump in year-over-year revenue for ??688 crore in the June quarter. This figure was, however, significantly lower than the ??1,104 crore of revenue in the March quarter.

The consolidated order book is ??6,140 crore, which means segment revenue can rise quickly when the going turns around.

There could be some recovery in air conditioner sales at the start of the holiday season, and analysts say low channel inventory is also likely to help.

“With the summer season behind, Voltas has limited leeway to surprise on earnings, especially given the strong base quarters (from last year),” analysts at Motilal Oswal Financial Services Ltd (MOFSL ).

In addition, weak demand meant that the company was also unable to fully pass on the increase in raw material costs.

Given a weak T1FY22 and mixed margin comments, analysts at Kotak Institutional Equities reduced their Ebitda estimates for this fiscal year by 21%.

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