Pick of the Week: Voltas

BUY VOLTAS

Equity : 33.09 Cr, BSE Code : 500575, CMP : 163.50

BUY VOLTAS @ 163.50 : 164 TGT 177 : 178

Voltas Limited, a part of the TATA conglomerate, was incorporated in 1954. The collaboration of Tata Sons Ltd. with a Swiss firm Volkart Brothers formed Voltas in 1951. It is India's premier airconditioning and engineering service providers. Its operations are organized into four independent business specific clusters viz, Electro-Mechanical Projects & Services, Unitary cooling products for comfort & commercial use, Engineering Agency & Services and others.

Voltas is also actively engaged in the procurement and marketing of air conditioners, textile machinery, machine tools, mining and construction equipment and industrial chemicals. Its factories are located at Thane (Maharashtra), Dadra and Sanathnagar (Andhra-Pradesh). Its offices cover all metros and other major Indian cities. Its overseas offices are located in Abu Dhabi (UAE), Hong Kong and Singapore. It has technical collaborations with international companies like Hitachi (Japan), Standard Refrigeration (USA), Dunham Bush (USA), Hercules (USA), Mitsubishi (Japan) etc. It has six subsidiaries and five joint ventures.

The company has recently bagged Rs 2.60 billion contract from Emirates Central Cooling Systems Corporation for the construction of a cooling plant at the Dubai International Financial Centre. Under the contract, the company will complete civil, mechanical, electrical and plumbing works in addition to the construction of the 66,000 refrigeration ton district cooling plant. The project is expected to be completed in 15 months. This is among one of the large contract that has been awarded to company and is expected to add to the growth of top line and bottom line for the company.

The company in spite of rise in input cost has not hike the price of its air � conditioners. Steel, copper and aluminum contribute 70% to the input cost and due to the rise in cost of these inputs by 4% - 5% the sales revenues of the AC manufacturers in India have been affected. The company is planning to meet this rise in cost through high volume growth. The domestic room AC market has been estimated at 2 million during the financial year ending March 2008.The company commands 17% of the domestic market share in room ACs, which it plans to increase to 20% by next year which will help company in driving its volume growth.

The company with diversified business model and wide range of product line which is directly related to the economic growth is expected to drive its growth as economic growth is going ahead on strong platform and with more and more urbanization and changing demographics the demand for products like air � conditioners, construction equipments, refrigeration equipment, water coolers, freezers etc. are witnessing huge growth. Therefore, company is expected to capitalize its future growth through grabbing these opportunities.

The company has emerged from being a consumer appliance company operating in highly competitive arena to one that has expertise in the niche engineering area of electro � mechanical projects and services. This, we believe has the potential to take the company on to a high growth trajectory in the future. Sales and NP for year ended 06 � 07 were 2400.6 Cr & 129.6 Cr. Sales and NP for latest Quarter 664.8Cr & 42.4Cr. On YOY basis NP has increased by 43 % & based on quarter latest its increased by 127% Dividend during year ended 06 � 07 was 100 %