Near term hiccups but structural growth drivers intact…
Voltas, a Tata Group company, is India’s leading air conditioning and engineering services company. In FY16, Voltas derived 47% & 44% of its turnover from Electro-mechanical Projects (EMP) & Unitary Cooling Products (UCP) segment respectively.
View & Valuvation
Given Voltas’ dominant position in AC segment coupled with a gradual recovery in its EMP segment, we expect revenue/PAT to grow at a CAGR of 5.6/16.4% over FY16-18E. Further, EBITDA margin is expected to improve by 80bps to 8.3%. Further, the recent ~20% correction in stock captures the demonetisation impact & risk-reward equation appears to be favourable. We recommend Voltas with BUY rating with a TP of Rs368 at 26x FY18E EPS.
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