Voltas Limited - Q2 FY14 Result - Quick View - CMP Rs.111 - Rating Changed to HOLD - Sushil Finance

During the quarter, the revenue and profitability from Electro-mechanical Products & Services (EMPS), which contributes substantially to the company's top-line was negatively impacted primarily by the international businesses which, like much of the construction industry in the Middle East, continued to be affected from cost-overruns led by delays in projects booked at the peak of the busy period. As on September 30, 2013, the outstanding order book of this segment stood at Rs.43,490 mn, including Rs.22,620 mn pertaining to the domestic business and balance Rs.20,870 mn for the international projects business.

The Engineering Products and Services (EPS) segment's consolidated revenue stood higher at Rs.1,264 mn as compared to Rs.1,139 mn in the previous year. Overall, both textile machinery and mining & construction equipment businesses performed well in spite of continued adversities. The Q2 market share for spinning machinery was sustained at 60%.

Unitary Cooling Products (UCC) reported moderate 2.9% YoY growth to Rs.2,643 mn on account of an extended monsoon as well as cyclones in South and East India, impacted overall demand for air conditioners. Nevertheless, as per GFK Nielsen report, the business sustained its leadership thereby, improving its average market share during the quarter to 20.5%.

The company's Balance Sheet continues to remain strong with shareholders' equity increasing to Rs.17,315 mn; additionally, the overall debt has been toned down to Rs.2,422 mn and the debt-equity-ratio to 0.14x r which mainly pertain to the overseas operations.

The Sidra Medical & Research Centre project is now over 93% complete. The testing and commissioning phase has begun in several parts of the project, the main contractor is simultaneously negotiating a supplementary agreement to cover its entitlements relating to extension of time. The company also continues to pursue its claims and variations vigorously through all possible channels. The Management focuses on a strategy to remain highly selective in choice of projects keeping in mind risk based parameters.

During our previous result update dated February 20, 2013, we had recommended BUY at the price of Rs.89. The stock has returned 24.7% since our previous update. We recommend our investors to HOLD the stock as we continue to maintain our positive outlook for the stock.

Source : Equity Bulls

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