Excerpt from Research Report published by one of the leading Brokers
At the current market price of 304, based on our estimates, Voltas is trading at FY 2017E and FY2018E P/E of 22.1x and 18.1x, respectively.
With inflation under control, rate cuts announced, when coupled with Voltas'strong positioning in the lowly penetrated AC market, comforts us that AC sales should continue to report strong growth, going forward. In FY2015, the UCP segment contributed ~72% of the consol. EBIT. Also, completion of low margin EMP projects and increased contribution of high margin projects indicate that the EBIT margins of the EMP segment would improve from 1.0% in FY2015 to 5.0% in FY2018E.
On the whole, we expect Voltas to report a top-line and bottom-line CAGR growth of 9.5% and 13.1% during FY2015-18E, respectively. Our growth assumption captures (a) pick-up in international award activity, which should lead top-line growth as well as EMP segment EBIT margin expansion, (b) continued growth in domestic AC sales, with Voltas being able to retain its ‘Numero Uno’ status.
Noticeably in the last few years, the EBIT mix of Voltas has shifted from being
heavily dependent on the EMP segment to a
now dominant share of the UCP segment. The contribution of the UCP segment in the consol. EBIT has increased
from 32% in FY2011 to 72% in FY2015. We expect the same to be over 64% levels during FY2016-18E. Considering the shift in the consol. EBIT mix, positive cues, and case for improvement in the business segment’s performances, we expect
scope for improved profitability and better investment return ratios, going forward.
Considering the higher dependency on the UCP segment, we have compared Voltas to Hitachi (which is trading at a FY2018 P/E multiple of ~36.0x).
We assign Voltas a 21.0x PE multiple to our FY2018E EPS estimate of 16.8/share and arrive
at a price target of 353 in 12 months time. This reflects 16% upside potential from the current levels.
At the current market price of 304, based on our estimates, Voltas is trading at FY 2017E and FY2018E P/E of 22.1x and 18.1x, respectively.
With inflation under control, rate cuts announced, when coupled with Voltas'strong positioning in the lowly penetrated AC market, comforts us that AC sales should continue to report strong growth, going forward. In FY2015, the UCP segment contributed ~72% of the consol. EBIT. Also, completion of low margin EMP projects and increased contribution of high margin projects indicate that the EBIT margins of the EMP segment would improve from 1.0% in FY2015 to 5.0% in FY2018E.
On the whole, we expect Voltas to report a top-line and bottom-line CAGR growth of 9.5% and 13.1% during FY2015-18E, respectively. Our growth assumption captures (a) pick-up in international award activity, which should lead top-line growth as well as EMP segment EBIT margin expansion, (b) continued growth in domestic AC sales, with Voltas being able to retain its ‘Numero Uno’ status.
Noticeably in the last few years, the EBIT mix of Voltas has shifted from being
heavily dependent on the EMP segment to a
now dominant share of the UCP segment. The contribution of the UCP segment in the consol. EBIT has increased
from 32% in FY2011 to 72% in FY2015. We expect the same to be over 64% levels during FY2016-18E. Considering the shift in the consol. EBIT mix, positive cues, and case for improvement in the business segment’s performances, we expect
scope for improved profitability and better investment return ratios, going forward.
Considering the higher dependency on the UCP segment, we have compared Voltas to Hitachi (which is trading at a FY2018 P/E multiple of ~36.0x).
We assign Voltas a 21.0x PE multiple to our FY2018E EPS estimate of 16.8/share and arrive
at a price target of 353 in 12 months time. This reflects 16% upside potential from the current levels.
Crude Oil and Brent Oil September contracts have gained 0.4 percent each at $ 45.94 and $ 47.38 a barrel, respectively.
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