Reliance Securities

Voltas (Buy)

CMP: ₹589.55

Target: ₹681

Annual report of Voltas highlights focus on “Opportunities — Invest, Deliver and Grow”. It has launched several ‘Make in India’ initiatives and investing in manufacturing unit in Sanand for its JV Voltbek, Tirupati for ACs, air coolers and commercial refrigeration and in Waghodia (Gujarat) for higher tonnage commercial cooling products.

The unitary products segment, a cash cow for Voltas, is the best play on the structural growth opportunity in low AC penetration and hot weather climate in India. The company sold 12 lakh units in FY19 and maintained No 1 position in room AC segment with a market share of 23.7 per cent. Voltas is expanding into other consumer durable segments like air-coolers and now expanding into other durable segments by JV with Arcelik.

Outlook & valuation: Sustained market leadership in room AC segment and foray into other consumer durable segments continue to augur well for Voltas. We reiterate our ‘buy’ recommendation on the stock with a target price of ₹681, valuing it at 30 per cent of FY21E earnings.

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