Brokerage house Dolat Capital has recommended a reduce rating on Voltas with a target price of Rs 225 in its November 18, 2014 research report.
"Voltas reported in line results, which was a function of better revenue mix with higher contribution from the UCP segment. While revenues were 11% below estimates, better product mix led to EBITDA and profitability in line with our estimates. Revenue for the quarter declined 9% YoY to `9.8 bn led by the EMPS (projects business) and EPS (agency business) segment. Current quarter performance has been in line with previous few quarters wherein the UCP segment has been the contributor of growth and profitability. Order flows during the quarter was also muted at `4 bn leading to an order book of `36.8 bn (-3% QoQ). With delayed improvement in the EMPS segment coupled with expensive valuations (post recent run-up) we downgrade the stock to REDUCE."
Valuation: "UCP segment continues to be growth driver for the company. Current quarter performance has also been driven by the UCP segment, while the EMPS segment continues to be a laggard. Recovery in margins in the EMPS segment (in the wake execution delays faced by the company) remains our key concern. The stock has also run-up recently which caps any meaningful upside over the medium term. The stock trades at P/E multiple of 24.5x based on our FY16 EPS estimate of `11.4 per share. While we maintain our target price of Rs 225 per share, we change our rating to REDUCE from ACCUMULATE earlier", says Dolat Capital research report.
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