Voltas Ltd is a large-cap company with a market capitalization of ₹32,482 Crore that operates in the Consumer Durables industry. Voltas Limited, a division of the Tata Group, is India’s No. 1 Room Air Conditioner brand, with a market share of more than 24 per cent. Voltas is now trading at ₹981.45, up 0.092 per cent from its previous close. The stock reached a 52-week high of ₹1,356.90 on 19th October 2021 and a 52-week low of ₹922.55 on 16th May 2022, showing that the stock is trading 27 per cent below its 52-week high and 6 per cent above its 52-week low at the current level. Voltas is currently trading below the 5-day, 20-day, 50-day, 100-day, and 200-day moving averages, and the stock has been losing for the previous three days, down more than 2% in that time, and the stock has dropped 20.18 per cent year to date (YTD) so far in 2022.
The brokerage firm ICICI Securities has maintained a ‘HOLD’ rating on the shares of Voltas for a target price of ₹1,033. The brokerage has said in a note that “Voltas struggled to generate positive economic value during FY22 due to a decade-low RoE. We note its EVA creation was impacted for first time in past decade. It also lost market share by 180bps in FY22 after gaining for a decade. Voltas Beko customer acceptance has increased and it reported 45% volume growth in FY22, to claim ~3% market share in home appliances segment.”
Based on the valuation and outlook for the stock, ICICI Securities has said “We model Voltas to report revenue, EBITDA and PAT CAGRs of 15.3%, 14% and 24.2% respectively, over FY22-FY24E, and RoE to move to 12.5% in FY24E from 9.7% in FY22. While we remain positive on the company, we believe upside is capped at current valuations (42x of FY24E EPS). Maintain HOLD on the stock with a DCF-based target price of Rs1,033 (implied P/E of 44x of FY24E).”
BOB Capital Markets on the other hand has said in its note that “VOLT continues to be the strongest player in the RAC business and expects to deliver double-digit margins. We are confident of the company’s growth trajectory and continue to value the stock at 50x FY24E EPS, a 40% premium to its 5Y average, for an unchanged TP of ₹1,250.”
The Board of Directors has recommended a dividend of Rs.5.50 per share on a face value of Rs.1 per share (550 per cent) for the fiscal year 2021-22, subject to shareholder approval at the Company’s 68th Annual General Meeting. This amounts to a dividend yield of 0.55 per cent at the current share price of ₹987. What might make the stock appealing to purchase is that it is almost debt-free and has a respectable dividend payout of more than 30%, but key downsides such as low sales growth of more than 5% over the last three to five years and a high PE of 64.81 make the stock worth reconsidering before buying.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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