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Voltas: Cooling products steal the show!
Jul 29, 2010

Voltas has announced its 1QFY11 results. The company has reported a 13% YoY increase and a 18% YoY increase in sales and net profits respectively. Here is our analysis of the results.

Performance summary
  • Sales grow by 13% YoY in 1QFY11. Growth aided by a stellar performance of the company’s unitary cooling products business.
  • Operating margins expand by 0.4% YoY owing to lower cost of raw materials as well as lower other expenditure (both as a percentage of sales).
  • Other income comes in higher by 18% YoY during the quarter. This, along with the expansion in operating margins leads to a bottomline growth of 18% YoY.

    Financial performance snapshot
    (Rs m) 1QFY10 1QFY11 Change
    Sales 12,419 14,031 13.0%
    Expenditure 11,393 12,807 12.4%
    Operating profit (EBDITA) 1,025 1,223 19.3%
    Operating profit margin (%) 8.3% 8.7%  
    Other income 215 253 17.8%
    Interest 36 53 45.6%
    Depreciation 49 50 1.8%
    Profit before tax 1,155 1,374 19.0%
    Extraordinary income/(expense) 28 (7) -126.4%
    Tax 387 429 11.0%
    Profit after tax/(loss) 796 937 17.7%
    Net profit margin (%) 6.4% 6.7%  
    Minority interest (7) (5)  
    Net Profit 789 932 18.1%
    No. of shares 330.9 330.9  
    Diluted earnings per share (Rs)*   11.9  
    P/E ratio (x)*   17.4  
    * On a trailing 12-months basis

    What has driven performance in 1QFY11?
    • The 13% YoY growth in Voltas' sales during 1QFY11 was led by robust 41% YoY growth in its unitary cooling products business which contributed to 42% of the company’s revenues during the quarter. An exceptionally hot summer this season ensured robust volume growth for the business during the quarter. The electro-mechanical projects & services (EMPS) business on the other hand had a subdued quarter this time due to slower project implementation by some of the company’s clients. The segment’s order book at the end of June 2010 stood at Rs 50 bn. As for the company’s engineering products and services (EPS) business, sales increased by 5.6% YoY during 1QFY11.

      Segment-wise performance
      (Rs m) 1QFY10 1QFY11 Change
      Electro-Mechanical Projects Services (EMPS)
      Revenue 7,001 6,926 -1.1%
      % share 56% 49%  
      PBIT margin 8.7% 8.5%  
      Engineering Products Services (EPS)
      Revenue 1,139 1,203 5.6%
      % share 9% 9%  
      PBIT margin 13.8% 22.9%  
      Unitary Cooling Products (UCP)
      Revenue 4,154 5,868 41.3%
      % share 33% 42%  
      PBIT margin 9.1% 9.3%  
      Others
      Revenue 127 38 -70.4%
      % share 1% 0%  
      PBIT margin 11.3% 2.7%  
      Total
      Revenue* 12,421 14,034 13.0%
      PBIT margin 9.3% 10.0%  
      * Excluding inter-segment adjustments

    • Voltas reported a 0.4% YoY expansion in operating margins during 1QFY11. This was a result of lower raw materials costs as well as other expenditure (both as a percentage of sales). Based on segments, the best performance was recorded by EPS, where EBIT margins expanded by a significant 9.1% YoY.

    • Led by a decent growth in topline, the expansion in operating margins, higher other income and a lower effective tax rate, Voltas recorded an 18% YoY growth in its net profits.

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