Buy Voltas; target of Rs 230: OPERATOR CALLS
Buy Voltas; target of Rs 230: OPERATOR CALLS
DAILY OPERATOR BASED 97% ACCURACY INTRADAY CALLS
& PER CALL
YOUR CONFIRM PROFIT RS.3000 FOR FREE TRAIL
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PROFITS
The Projects business continued to report EBIT losses for the third
consecutive year, as the pace of execution failed to pick up. However,
curtailment of EBIT losses at 1.5% of project revenues against 3.3% in FY12
could be a key positive in a constrained environment.
RIEL reported EBITDA breakeven but continued to struggle with post tax
losses, compelling VOLT to infuse capital in FY14.
VOLT’s net working capital (NWC) remained elevated on consolidated basis at
53 days against 30 days in FY11.
However, its NWC cycle reported sharp improvement on standalone basis (NWC
days down by 10 days on standalone basis), supported by lower inventories
(improvement of 4 days) and increase in trade payables (higher by 4 days). For
FY14, the Room AC division reported 7% volume growth. Overall, the Unitary
Cooling division reported 39% revenue growth.
EBIT margins across the division expanded from 9% in FY13 to 12.5%,
supported by favorable product mix and higher demand from tier III & IV
cities, which VOLT caters to through a pan India network of ~6,500 retailers.
The Unitary Cooling division reported the highest margins in FY14 at 12.5% from
a low of 5.9% in FY09.
VOLT’s manpower cost for FY14 declined 6% on a consolidated basis and 15%
on a standalone basis. Employees on its payroll continued to decrease for the
third consecutive year in FY14, with 65% of its manpower being on contract
basis. VOLT has been rationalizing manpower to realign itself with current
industry requirements.
"VOLT trades at 19.3x FY16E of INR10.4 and 15.7x FY17E EPS of INR12.8,
and at an EV of 15.5x FY16E EBITDA and 12.2x FY17E EBITDA. Near-term growth
triggers are dormant, considering the tepid pace of project execution across
sectors. Profitability of the Projects division is also likely to be under
pressure, as VOLT is yet to complete legacy projects.
The Unitary Cooling division could
be a major beneficiary of operating leverage once demand picks up across room
ACs and refrigeration boxes. We model 14% revenue CAGR and 26% PAT CAGR over
FY15-17. We maintain Buy; our target price is INR 230", says analysis
research report. TeamRajathee