Voltas: Consumer durables hold the key - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Voltas: Consumer durables hold the key

Sep 8, 2000

Though a Original Equipment Manufacturer (OEM) supplier to companies like Cadbury, HLL, LG, Voltas is increasing its direct presence in the market. It plans to sell refrigerators (‘Voltas’ air conditioners have already hit the market) under its own brand when the agreement with Electrolux ends early next year. During FY98, the company divested its white goods business to Electrolux Voltas Limited (EVL). This includes the transfer of the Voltas brand and its refrigerators and washing machines manufacturing facility. This agreement with the Swedish major ends early next year. This would mean that the company would regain its Voltas brand. With this, Voltas is considering the re-launch of its own brand of refrigerators next year.

The company recently received orders worth Rs 9 bn from LG Electronics to supply 1.2 m refrigerators over a period of three years. This is expected to contribute to better results both in terms of value and volumes in coming years.

The company is also set to benefit indirectly, as it is a supplier of refrigerators to Cadbury, Amul, Pepsi, UB Group, Hindustan Lever and Nestle. All these FMCG majors have huge expansion plans especially for rural segments. This should add directly to the company’s topline. Aimed to meet its OEM obligations, the company has planned to increase its capacity at its Hyderabad unit to 0.5m units from existing capacity of 0.3 m units.

However, the performance of its other divisions is at best mixed. For instance air conditioning systems, pumps and project divisions are set to witness strong growth in coming years as both telecommunications and power sector reforms gains momentum (Voltas manufactures specialised air conditioning equipment for telecommunication applications). In fact the order book for pumps and project business division (used in power plant) has shown a 250% jump last year. Focus on turnkey projects has also helped the division in significantly increasing profitability for this division and is expected to do so in FY01.

However, for such a diversified company that has a presence in more than seven different segments, overall growth is not expected to be of high order except for certain segments like consumer goods and engineering divisions. Moreover, realisations have fallen by as much as 5% in the room air conditioners division, which account for 14% of sales. This is expected continue as competition is heating up in this segment. The prevailing demand scenario for textile machinery and mining divisions also are not encouraging.

Nevertheless, apart from LG Electronics, it has won additional orders from Amul for supplying 110-ml capacity visi-coolers. There is no denying that the company is sitting on a healthy order book. The operational efficiency is also expected to increase as it is restructuring its business. In spite of all these favorable factors, the key lies in the company’s ability to tackle competition and grow simultaneously.

The stock is currently trading at Rs 33.8 at a P/E multiple of 20.2x on the annualised 1QFY01 earnings.

Equitymaster requests your view! Post a comment on "Voltas: Consumer durables hold the key". Click here!

  

More Views on News

VOLTAS 2020-21 Annual Report Analysis (Annual Result Update)

Oct 18, 2021 | Updated on Oct 18, 2021

Here's an analysis of the annual report of VOLTAS for 2020-21. It includes a full income statement, balance sheet and cash flow analysis of VOLTAS. Also includes updates on the valuation of VOLTAS.

VOLTAS Announces Quarterly Results (1QFY22); Net Profit Up 63.7% (Quarterly Result Update)

Aug 9, 2021 | Updated on Aug 9, 2021

For the quarter ended June 2021, VOLTAS has posted a net profit of Rs 2 bn (up 63.7% YoY). Sales on the other hand came in at Rs 18 bn (up 37.6% YoY). Read on for a complete analysis of VOLTAS's quarterly results.

VOLTAS 2019-20 Annual Report Analysis (Annual Result Update)

Dec 14, 2020 | Updated on Dec 14, 2020

Here's an analysis of the annual report of VOLTAS for 2019-20. It includes a full income statement, balance sheet and cash flow analysis of VOLTAS. Also includes updates on the valuation of VOLTAS.

Why CG Consumer Electrical Shares Were in Focus Today (Views On News)

Jul 26, 2021

The company's net profit for the June 2021 quarter zoomed 29% YoY despite the Covid-19 second wave.

VOLTAS Announces Quarterly Results (1QFY21); Net Profit Down 50.2% (Quarterly Result Update)

Sep 1, 2020 | Updated on Sep 1, 2020

For the quarter ended June 2020, VOLTAS has posted a net profit of Rs 934 m (down 50.2% YoY). Sales on the other hand came in at Rs 13 bn (down 52.1% YoY). Read on for a complete analysis of VOLTAS's quarterly results.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

India's Top 5 Monopoly Stocks to Watch Out for (Views On News)

Nov 30, 2021

These 5 companies dominate their sectors with a huge piece of the pie.

The Biggest Winners and Losers in India's Transition to Electric Vehicles (Profit Hunter)

Nov 26, 2021

How India's EV transition could be a major headwind for the incumbents.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

VOLTAS SHARE PRICE


Dec 7, 2021 (Close)

TRACK VOLTAS

COMPARE VOLTAS WITH

MARKET STATS