Voltas reported a strong set of numbers for 1QFY2017. Top-line at Rs1,845cr is
higher than our expectation and up 18.2% yoy, led by strong UCP segment sales.
UCP segment impressed us with 28.9% yoy increase in revenue to Rs1,196cr (65%
of overall 1QFY2017 revenues). EBITDA margins for the quarter expanded by
204bps yoy at 10.3%. With most of the legacy projects nearing completion, the
EMP segment reported 1.9% EBIT margin, against 1.5% in corresponding quarter
of previous year. Better than expected UCP segment sales coupled with higher
other income helped the company report a PAT of Rs158cr, up 53.7% on yoy basis.
On adjusting for ~Rs1cr of exceptional item, Adj. PAT grew 52.8% yoy to Rs157cr.
Another positive is strong order inflows of Rs1,083cr for the quarter. Order Book
for EMP segment as of 1QFY2017-end stands at Rs4,417cr (order book [OB] to
LTM ratio of 1.6x).
Valuation: We expect Voltas to report a strong 13.3% top-line and 18.1%
bottom-line CAGR during FY2016-18E, respectively. On considering the case for
improvement in all of its business segments’ performances, we expect improved
profitability and better investment return ratios for the company, going forward.
We assign Voltas 25.0x PE multiple to our FY2018E EPS estimate of Rs16.3/share
and arrive at price target of `407. This reflects 17% upside potential from the
stock’s current market price. Accordingly, we continue to maintain BUY rating on
the stock.

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