X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Voltas: Why has it outperformed? - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Sep 13, 2004

    Voltas: Why has it outperformed?

    As markets have started realising the engineering story (investment in power sector, higher infrastructure spending and upturn in the investment cycle), mid-cap engineering companies like Voltas have witnessed significant buying interest on the bourses in last few trading sessions. The stock has gained around 40% in last two months and has outperformed other engineering companies like ABB (up 8%), Thermax (up 15%) and Siemens (up 23%). Let's have a closer look.

    Voltas has organized its operations in three segments, namely the electro-mechanical projects & services (air conditioning and electrification of airports etc, water management and treatment), unitary cooling products (commercial cooling equipments like refrigerators, air conditions and contract manufacturing), engineering agency & services (construction, mining and textile equipments) and others.

    Taking into consideration last five years, the company's topline has clocked around 12% CAGR, but the bottomline has grown at a faster rate of around 63%. The operating margins of the company stand at below 3%, which is amongst the lowest in engineering universe. Voltas' unitary cooling division is largely responsible for this owing to very high competition. Just to put things in perspective, EBIT margins from this division stood at 1.4% in FY04. However, the company is planning to divest this business and is focusing on growth from its core engineering business.

    The engineering agency business is dependent on the performance of the mining, textile and the engineering sectors for growth. With the capacity addition plans laid out by textile companies and expansion of mining capacities, the topline of this segment is expected to grow at a double-digit rate for next two to three years. The operating margins of this business are very high (33% in FY04) since this division is also into maintenance contracts.

    As far as its engineering agency business is concerned, the company has built up a track record of executing prestigious projects in the domestic as well as international market (Hong-Kong international airport, Bahrain international airport). With the government's focus on infrastructure development and development activities in Asian region, a healthy revenue growth is foreseeable. The margins from this business are lower (2.8%) because of high competition in bidding contracts and higher raw material cost. However, we expect the margins to reach 5% mark in the 18 months.

    The stock currently trades at Rs 145 implying a P/E multiple of 11.9x FY04 earnings, which seems attractive as compared to other engineering peers. However, the valuation has to be viewed in the context of a diversified business mix and volatility in earnings owing to the seasonality of the unitary division. Overall, considering the solid track record of the company on the project execution front, we foresee engineering agency business to remain a key growth driver in the long-term.

     

     

    Equitymaster requests your view! Post a comment on "Voltas: Why has it outperformed?". Click here!

      
     

    More Views on News

    BHEL: Margins Dip into the Negative (Quarterly Results Update - Detailed)

    Aug 14, 2017

    The company also saw order inflows of Rs 18 billion during the quarter, which was a massive 41% YoY lower than the previous year's quarter.

    Cummins Ltd: Domestic Revenues the Saving Grace (Quarterly Results Update - Detailed)

    Aug 14, 2017

    The domestic economy continues to grow largely in areas which are positively impacted through continuing government investments in infrastructure.

    ABB: Large Orders Remain Muted (Quarterly Results Update - Detailed)

    Aug 2, 2017

    Decisions on government initiatives and private investments were stalled in anticipation of upcoming tax restructure.

    L&T: Amidst a Challenging Business Environment (Quarterly Results Update - Detailed)

    Aug 1, 2017

    Bank credit to industry remained muted and investment momentum was driven mostly by public sector spending.

    L&T: Private Sector Capex Remains in a Tizzy (Quarterly Results Update - Detailed)

    Jul 24, 2017

    Vast majority of private players remain more concerned with debt payback rather than starting new projects.

    More Views on News

    Most Popular

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    The Most Profitable Investment in the History of the World(Vivek Kaul's Diary)

    Aug 8, 2017

    'Yes, it looks like a bubble. And, yes, it's like buying a lottery ticket. But there's something happening that has never happened before. It's an evolutionary leap in money itself.'

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    THERMAX LTD SHARE PRICE


    Aug 18, 2017 (Close)

    TRACK THERMAX LTD

    • Track your investment in THERMAX LTD with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks

    THERMAX LTD - DONGFANG ELEC. COMPARISON

    Compare Company With Charts

    COMPARE THERMAX LTD WITH

    MARKET STATS