X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 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: Cooling Products continue outperformance - Views on News from Equitymaster
StockSelect
  • MyStocks

MEMBER'S LOGINX

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

Voltas: Cooling Products continue outperformance
Nov 21, 2014

Voltas has announced the second quarter (2QFY15) results. The company has reported a 10% YoY decline in sales while net profits grew by 18% YoY during the quarter. Here is our analysis of the results.

Performance summary
  • Net sales declined by 10% YoY in 2QFY15.
  • Operating profits rose substantially, growing 84% YoY during the quarter.
  • The company reported net profit increase of 18% YoY.
  • The order book of Electro-Mechanical & Project services (EMPS) segment stood at Rs 36.8 bn compared to Rs 43.5 bn at the end of the same quarter last year.

(Rs m) 2QFY14 2QFY15 Change 1HFY14 1HFY15 Change
Sales 10,765 9,689 -10.0% 26,783 27,212 1.6%
Other operating income  40 157 293.3%  55 208 276.1%
Expenditure 10,383 9,069 -12.7% 25,911 25,324 -2.3%
Operating profit (EBITDA) 423 777 83.9% 927 2,096 126.0%
Operating profit margin (%) 3.9% 7.9%   3.5% 7.6%  
Other income 303 188 -37.8% 524 480 -8.3%
Interest  46  44 -3.7% 115 131 13.5%
Depreciation  60  69 16.0% 120 130 8.0%
Profit before tax 620 852.8 37.5% 1,216 2,316.2 90.5%
Onerous contract - -   - -  
Exceptional items       (1) 5  
Tax 196 351 79.0% 386 717 85.7%
Profit after tax/(loss) 424 502 18.3% 829 1,604 93.5%
Minority interest (1) (7)   1 (19)  
Share of associates - 4   - 4  
Net profit 423 499 18.1% 830 1,589 91.4%
Net profit margin (%) 3.9% 5.1%   3.1% 5.8%  
No. of shares         331  
Diluted earnings per share (Rs)*         9.7  
P/E ratio (x)*         27.5  
* On a trailing 12-months basis

What has driven performance in 2QFY15?
  • The sales for the quarter have been boosted by growth in revenues in Unitary Cooling Products segment, which saw a 31% YoY growth in sales. The Electro-Mechanical Projects and Services (EMPS) segment saw a fall in sales to the tune of 22% YoY. The Engineering Products & Services (EPS) segment of the company saw an even higher 31% YoY fall in sales.

  • The growth in operating margins from 3.9% to 7.9% is what drove the big increase in operating profit. Substantial fall in the company’s raw material costs is what helped the company post this increase in margins. The margins will improve in the company’s EMPS segment with the execution of newer orders which have a better margin profile. However, overall margins in the segment continue to be impacted largely on account of the cost overruns in the older overseas projects.

  • A big increase in the effective tax rate during the quarter along with a substantial fall in other income led the company to post only an 18% YoY growth in profits, much lesser than the 84% YoY jump in operating profits.

    Segment-wise performance#
    (Rs m) 2QFY14 2QFY15 Change 1HFY14 1HFY15 Change
    Electro-Mechanical Projects & Services (EMPS)
    Revenue 6,709 5,253 -21.7% 13,638 11,476 -15.9%
    % share 62.3% 54.2%   50.9% 42.2%  
    PBIT margin 0.8% 0.9%   -1.6% 0.8%  
    Engineering Products & Services (EPS)
    Revenue 1,265 872 -31.1% 2,376 1,981 -16.7%
    % share 11.7% 9.0%   8.9% 7.3%  
    PBIT margin 21.8% 36.6%   24.6% 28.2%  
    Unitary Cooling Products (UCP)
    Revenue 2,643 3,449 30.5% 10,511 13,463 28.1%
    % share 24.5% 35.6%   39.2% 49.5%  
    PBIT margin 10.9% 12.4%   9.2% 11.8%  
    Others
    Revenue 151 117 -22.4% 262 298 13.7%
    % share 1.4% 1.2%   1.0% 1.1%  
    PBIT margin 3.9% 6.3%   1.3% 12.8%  
    Total
    Revenue* 10,767 9,690 -10.0% 26,787 27,217 1.6%
    PBIT margin 5.8% 8.3%   5.0% 8.4%  
    * Excluding inter-segment adjustments
    # The segmental results are before exceptional items
What to expect?
Voltas has delivered healthy growth at the operating and net level largely due to the absence of losses in its EMPS segment coupled with a robust increase in revenues and margins of the UCP segment. In fact, even the EPS segment managed to contribute towards this as despite a fall in revenues, the segment managed to see a rise in operating profits, thus posting a substantial increase in margins.

At current price of Rs 267, the stock is trading at 20.6 times our estimated FY17 earnings. Considering these valuations, we maintain our sell view on the stock

To Read the Full Story, Subscribe or Sign In


Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

VOLTAS SHARE PRICE


Jan 19, 2018 (Close)

TRACK VOLTAS

COMPARE VOLTAS WITH

MARKET STATS