Voltas Stays in Vogue

Since our initial recommendation of Voltas in December 2013, the stock is up 128 per cent. Despite the gain, Voltas appears to be a good bet even at current levels. We show you why. Voltas has two main divisions. Electro-Mechanical Projects and Services (EMPS) is the biggest, bringing in 50 per cent of revenues, in which Voltas takes up large contracts both within and outside the country. The second is the Unitary Cooling Products (UCP) division that sells Voltas' room ACs. UCP brings in 39 per cent of revenues. Growth drivers UCP rules: Room ACs make up around 75 per cent of UCP sales. The rest come from other products like industrial ACs, commercial refrigerators like the one you see in an ice-cream parlour or your favourite cake shop. Then there are deep freezers, water coolers and even water dispensers. Years of marketing and the quality associated with the Tata brand have helped Voltas capture a volume market share of 20 per cent (FY14). In addition, a network of 6,500 plus dealers brings the company's products to customers. UCP revenues have grown at 16 per cent annually in the last five years. This is also positive for the company. Long-term trend intact: The penetration of ACs is limited to only four per cent of the country's 330 million households (ICICI Securities estimates). Rising disposable incomes and shift in customer preferences away from coolers to ACs is likely to improve penetration in the years ahead. Higher AC sales ahead: The domestic room

This article was originally published on April 03, 2015.