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| Image Credit: Voltas |
Voltas' stock soared 7% on the BSE to a record high of Rs 1,199.95 in the intraday session on Tuesday. On expectations of demand recovery ahead of the festive season and brief summer in West India, the stock of Tata Group company was quoting higher for the eighth consecutive day and has surged 25% during this period.
Voltas is India's unchallenged leader in cooling products and the No. 1 room air conditioner (RAC) brand, thanks to its strong Tata heritage. The firm is also a project specialist and a provider of engineering solutions.
The Indian government's determination to make India a worldwide manufacturing powerhouse for air conditioners as part of its "Atmanirbhar Bharat" project, as well as the much-anticipated production-linked incentive (PLI) scheme for white goods, are two clear positive catalysts for the stock.
The group's operations and financial results were impacted in the April-June 2021 quarter (Q1FY22) due to the outbreak of the second wave of the COVID-19 pandemic during the peak season, with lockdowns and restricted operational hours following the relaxation of state-wide lockdowns.
Voltas' primary operational strengths have been a gain in market share in the RAC category and a strong margin profile, which analysts at Emkay Global Financial Services expect to continue. According to the brokerage firm's Q1 result report, the improvement in product mix in RACs has been beneficial to margins, but higher promotional spending in Q1 has had an impact on the segment's margins.
“Demand recovery is already noticeable when regional lockdowns are eased. Unlike last year, we do not expect significant gains from pent-up demand, with the exception of cooling items, which may see some resurgence in the second summer season. In the next quarters, we expect increased housing activity and a return of Capex to keep revenue traction robust. In a consumer durables sector update, HDFC Securities noted, “leading corporations have already adopted price hikes to pass on most of the expenses, but continuing raw material inflation remains a concern.”
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Meanwhile, the company's board of directors has approved the transfer of its domestic project business relating to MEP / HVAC and Water projects, M&CE (Mining & Construction Equipment) business, and TMD (Textile Machinery Division) to its wholly-owned subsidiary, with an emphasis on sustained profitable growth and the need for increased focus on business-to-consumer (B2C) and business-to-business (B2B) verticals. On March 24, 2021, a Business Transfer Agreement (BTA) was signed, and the deal is expected to be completed by September 2021.
On the BSE, Voltas was trading 5% higher at Rs 1,180, compared to a 0.37 per cent advance in the S&P BSE Sensex. The counter's trading volume nearly doubled, with a total of 6.08 million equity shares changing hands on the NSE and BSE.
(Source: Business Standard)
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