AC market leader Voltas is in focus with the onset of summer. It has become the first in the industry to sell over 20 lakh ACs in a single fiscal (FY24).
The feat was achieved owing to its vast presence (over 25,000 customer touchpoints) and strong brand recall, but its financials warrant some caution.
Despite firm volume growth over the years, its revenue has grown a modest 8% per annum between FY18-FY22. The net profit has halved during this period.
It’s the shrinking operating margins in the biggest revenue segment – unitary cooling products (air-conditioning), dragging Voltas’ earnings.
Its room AC market share fell to 19% (9M FY24) from 21% in 2021 due to pricing pressures from intense competition.
It is also incurring losses in its second biggest vertical of EPC projects due to cost overruns and delayed payments in the international market.
Its weakening financials amid persistent industry headwinds fail to justify the stock’s hefty P/E of 172 times.