 "Voltas- consumer durables")
Shares of Voltas hit a record high of Rs 1,373.2 as they rose 11 per cent on the BSE in Monday’s intraday trade after the company achieved the highest ever air conditioner (AC) sales of over 2 million units in 2023-24 (FY24).
It became the first company in the domestic market to cross this landmark. The stock ended the day with gains of 6.07 per cent at Rs 1,307 while the S&P BSE Sensex was flat in trade.
The stock of the largest room AC player in the country has gained 58 per cent since December, with more than half of the gains coming in the last 10 trading sessions.
“The company achieved over 2 million AC units during 2023-24 (FY24), the highest-ever sales of ACs by any brand in a financial year in India, with a volume growth of 35 per cent,” Voltas said in a press release.
The company said the performance was attributed to consistent demand for cooling products during the year, coupled with the company’s strong offline and online distribution network, strongest brand equity, and innovative new launches.
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Voltas registered significant growth in volume in other cooling products, including air coolers and commercial refrigeration products.
Voltas Beko, its home appliance brand, also registered a volume growth of 52 per cent in the fourth quarter of FY24; and also achieved the milestone of close to 2 million home appliances (refrigerators and washing machines) in FY24. Overall, 5 million consumer products were sold across the country by Voltas in FY24, the company said.
In addition to strong volumes, what should help revenues for the market leader are price hikes and market-share gains.
Prabhudas Lilladher Research cited channel checks in March, which indicate that Voltas has taken a price hike of 2-3 per cent and the company has gained the most market share after Daikin in the room AC market. The brokerage has a ‘hold’ rating on the stock with a target price of Rs 1,199 per share.
After a subdued January and February, Nomura Research expects the company to be a key beneficiary of a pickup in demand towards the end of the quarter.
The India Meteorological Department has forecast more than average heatwave days this season (April-June), which augurs well for the demand for seasonal products such as ACs and fans.
Analysts Siddhartha Bera and Kapil Singh of the brokerage say that there has been a slight pullback in discounts in some cases, and strong demand could aid margins.
Within the consumer durables space, the brokerage maintains its preference for the AC segment, where structural growth visibility remains high. Voltas remains its preferred pick in the sector.
The brokerage expects Voltas to outperform the industry with 25 per cent/15 per cent growth for 2024-25 (FY25) and 2025-26 (FY26), led by a push across multiple channels, consumer offers, and new launches.
It has revised earnings upwards by 7-8 per cent annually for the FY24-26 period. It has maintained its price-to-earnings multiple at 45x for the cooling product segment and has a target price of Rs 1,450 compared to Rs 1,311 earlier.
It has also raised the industry volume growth from 12-14 per cent earlier to 15-20 per cent for FY25/26, given the low penetration and latent demand.
Voltas had highlighted in its 2022-23 annual report that the room AC market in India could hit the $5 billion mark by 2027-28, growing at an annual rate of 10 per cent. Given that it has a market share of 21.6 per cent and leads the sector, it is expected to be a major gainer of the sector’s growth.
