>VOLTAS: Electro Mechanical Projects (EMP) division & Unitary Cooling Products (UCP) division posted healthy performance

■ Healthy performance with adjusted net profit growth at 11% yoy
Voltas reported healthy performance with adjusted net profit growth at 11% yoy to Rs611 mn – growth in adjusted net profit comes after 5 quarters of decline in net profits and a dismal Q2FY12. Revenue growth was healthy at 12% yoy to Rs11.6 bn (above estimates) – led by both EPM (+19% yoy) and UCP (+19% yoy). EBITDA margins remained stable at 7.5% (-10 bps yoy) – above estimates. Led by healthy revenue growth, adjusted net profit was ahead estimates at Rs611 mn (+11% yoy).


■ …Barring for Rs2.8 bn cost over-runs in Sidra (Qatar) project
Voltas reported net loss of Rs1.15 bn after considering Rs2.8 bn cost over-run on Sidra Medical & Research Centre (Qatar) (valued at Rs10 bn) (net of tax – the impact is lower at Rs1.9 bn). The project is 53% complete and is expected to be fully complete by Q1FY13E. Voltas has provided all incurred and expected cost over-runs on the entire project in Q3FY12 itself, however, any further rise in expected costs is likely to negatively impact profitability of ensuing quarters. Also, recognition of claims on above escalations is likely to happen only on acceptance of the same by the customer and near to the completion of the contract.


■ EMP & UCP division post strong revenue growth, EPS division slips
Electro Mechanical Projects (EMP) division - posted healthy performance barring for Rs2.8 bn cost over-runs on Sidra project. Key highlights (1) Strong revenue growth at 19% yoy to Rs8.2 bn – led by speedier execution of Sidra Project (revenue contribution at Rs1.5 bn or 18%) (2) EBIT margins up 90 bps yoy to 7.3% with EBIT at Rs0.6 bn (up 37% yoy) – ahead estimates. Rohini Industrial Electricals (RIE) reported Rs80 mn loss (9MFY12 – Rs110 mn) at EBIT level due to execution of legacy orders – expected to be completed by FY12E end.


■ Unitary Cooling Products (UCP) division – posted strong performance despite continued decline in room air-conditioners industry (volumes down 28% in 9MFY12). UCP division revenues increased by 19% yoy to Rs2.3 bn (in line) – led by favourable revenue mix and price corrections. EBIT margins declined 360 bps yoy to 6.1% (lower than expectations) – owing to higher advertisement spends.


To read full report: VOLTAS
RISH TRADER