EARNINGS REVIEW: VOLTAS SHARES DROP OVER 9% ON WEAK Q4 RESULTS; SHOULD YOU STILL BUY?
Shares of Voltas lost over 9 percent in intra-day deals today after the firm posted weak results for the quarter ended March 2024 (Q4FY24). This is the third straight session of decline for the FMEG firm, losing over 15 percent in this period.
The firm reported a 22.75 percent drop in its consolidated net profit at ₹110.64 crore for Q4FY24 as against ₹143.23 crore in the corresponding period last year on the back of higher expenses. Meanwhile, the air conditioning and engineering services provider's revenue from operations in the quarter under review rose 42 percent to ₹4,203 crore from ₹2,957 crore in the year-ago period.
The total expenses in the fourth quarter came in at ₹4,044.90 crore versus ₹2,761.45 crore in the corresponding period a year ago. On the operating front, the home appliances manufacturer recorded a 340 basis point sequential drop in its EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) margin.
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The stock fell as much as 9.1 percent to its day's low of ₹1,261.65. Despite today's fall, the scrip is still over 69 percent above its 52-week low of ₹745, hit on July 14, 2023. Meanwhile, it has declined almost 16 percent from its record high of ₹1,500, hit earlier this month on May 2, 2024.
The stock has jumped over 72 percent in the last one year and over 29 percent in 2024 YTD.
Overall, for the fiscal ended March 31, 2024 (FY24), the consolidated net profit soared over 82 percent to ₹248.11 crore from ₹136.22 crore in the previous year. Meanwhile, its consolidated revenue from operations increased by 31.4 percent in FY24 to ₹12,481.21 crore, compared to ₹9,498.77 crore in FY23.
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Voltas also said that its board of directors has recommended a dividend of 550 percent at ₹5 per share of the face value of Re 1 per share for FY24 upon the approval of shareholders. "The directors have recommended a dividend of ₹5 per share on the face value of Re 1 per share (550 percent) for the year 2023-24 which shall be paid on or after the fifth day from the conclusion of the 70th Annual General Meeting, subject to the approval of shareholders of the company," it informed in a regulatory filing.
Q4 Results Review
Following the release of Q4 earnings, several brokerage firms have shared their outlook on Voltas. Nomura has maintained a ‘buy’ call on Voltas with a target price of ₹1,450 per share, reflecting a positive view for the company's future performance and a 15 percent upside.
Nomura expects EBIT margins to inch up to 9.5 percent/10.5 percent in FY25F/26F. "However, in projects, high losses remain a concern, and we expect EBIT margins to improve to ~4 percent in FY25/26F, which can be at risk if provisions for international projects continue," it cautioned.
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In contrast, Morgan Stanley has kept an ‘equal-weight’ rating with a target of ₹1,160 per share, suggesting a more neutral stance and an 8 percent downside.
Macquarie has also continued with a neutral rating and set a target price of ₹842 per share, implying an over 33 percent downside. The brokerage's note pointed out several key concerns, including an all-around margin miss in Q4 and underwhelming UCP (unitary cooling products) margins despite the strength of seasonal demand. Additionally, the note highlighted a slight market share loss, as FY24 year-to-date RAC (room air conditioner) market share stood at 18.5 percent compared to 19 percent in December 2023, indicating a potential challenge for the company.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
2024-05-08T07:36:54Z dg43tfdfdgfd