Voltas Limited offers engineering solutions for a range of industries in India and internationally. The company’s Electro-Mechanical Projects and Services segment manages and executes electrical, mechanical, and refrigeration, as well as water management and treatment projects. Its Engineering Products and Services segment sources, installs, and services textile machinery, mining and construction equipment, and materials handling equipment.
Voltas Ltd’s Q4FY11 revenue grew by 16.4%YoY to Rs16.8bn. As expected, OPM contracted by 210bps to 8.4% dragged by Electro-Mech segment . Lower operating profit coupled with higher interest charges translated in a 23.9% fall in adj. net profit to Rs961mn . Reported net profit was Rs1.0bn including exceptional income of Rs77mn.
Muted performance by Electro-Mech (MEP) segment: Revenues
from MEP segment (contributes ~57% to topline) grew by 2%YoY.
PBIT margin for the segment contracted by 184bps to 8.3% on the
back of lesser revenue booking, higher raw material cost and loss of
Rs160mn in Rohini Industrial Electricals. This led to 16.6% de-growth
in PBIT from this segment resulting inYoY decline in net profit for
the company.
Strong Revenue growth from Engineering/Cooling segments:
Revenues from Engineering segment grew by 45.2%YoY driven by
mining & construction, material handling business. Also, Cooling
segment posted strong growth of 44.7%YoY in Q4FY11. However,
PBIT margins for the segments fell by 599bps and 133bps
respectively mainly due to higher raw material prices.
Strong order inflows: Total order book for MEP segment as of
Q4FY11 stands at Rs49bn (up 4%YoY and 4%QoQ) out of which,
domestic orders comprise of Rs20bn. Order inflows in the quarter of
Rs11bn (up 175%QoQ) includes ~Rs2bn Metro Rail project and
another ~Rs2bn order from Middle East.
Outlook: Pickup in industrial activities and volume traction in cooling
product division promise better performance for Engineering and
Cooling segments. Rohini Industrial Electricals is expected to see
a turnaround in FY12 which should provide support to MEP segment.
Strong order inflow in the current quarter provides further upside.
Etihad Towers is the latest addition to Voltas' lengthy portfolio of electro-mechanical work for landmark developments, especially in GCC and SE Asian countries. Over several decades, Voltas has built up a history of engineering, procurement, installation and commissioning for multi-million dollar projects high in scope, scale, value and complexity. Notable recent projects include Ferrari World, F1 Grand Prix Circuit and Emirates Palace Hotel in Abu Dhabi; Burj Khalifa and Mall of the Emirates in Dubai; and the Rajiv Gandhi International Airport in Hyderabad, among others.
Voltas' Electrical Mechanical Division (EMD) has been conferred with the 'MEP Contractor of the Year'- 2011 award for the second time at MEP Awards 2011. Voltas, a prominent player in MEP contracting in the region was awarded with the most prestigious honour, namely ‘MEP Contractor of the Year’
VALUATIONS AND RECOMMENDATION
Estimates for FY12, is achivable on back of strong order inflow
and encouraging performance from Engineering /cooling segments.
Given the recent sharp correction in stock price and healthy
growth prospects, I recommend a buy on voltas at cmp Rs 90 for
long term investment with a target price of 160 in one year
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