Voltas shares: Nuvama upgrades rating after analyst meet; check target price

Nuvama, which attended analyst meet  at Voltas Ltd, upgraded its rating on the stock to 'Hold' from 'Reduce',  citing a recent sharp fall in the stock price. The domestic brokerage suggested a fresh September 2027 target price of Rs 1,220 for the Tata group stock against its earlier June 2027 target of Rs 1,230.

Voltas Ltd is prioritising market share and absolute profit growth over margin percentage in its unitary cooling products (UCP) business, while highlighting opportunities in compressors, data centres, exports, commercial air conditioning and domestic MEP, according to Nuvama Institutional Equities

Following the company's analyst meet, Nuvama has cut its FY27 and FY28 earnings per share (EPS) estimates for Voltas by 10% and 9%, respectively, to factor in margin headwinds.

Management indicated that secondary sales for room air conditioner (RAC) players are expected to grow 15–20% year-on-year in Q2FY27, with Voltas outpacing peers. Channel inventory is now below 30 days in most locations. Voltas Vertis, positioned as the company's 'better' offering, accounted for 47% of sales this year, compared with 15% 18 months ago, following efforts to improve its portfolio, features and branding. Industry mix accounts for 45-50% of total volumes.

Voltas' volume market share improved to 18.6% in July, giving it an almost 600-basis-point lead over the second-best player. Its April-July 2026 market share stood at 17.5%, up 160 basis points year-on-year. Management aims to sustain a significant lead over competitors. The commercial refrigeration segment has also improved sequentially, particularly on the volume and margin fronts.

Management expects UCP margins to improve over time as higher revenue drives better cost absorption, alongside its cost-takeout programme. However, "market share and absolute profit growth, rather than a specific margin target, remain two key objectives for Voltas’s unitary business," Nuvama noted.

Compressor plans

The Voltas-Atomberg joint venture has established its prototype and is moving towards large-scale pilot production and field testing. Voltas' investment in the JV could be around Rs 250 crore, although the amount is yet to be finalised. Bulk production is targeted for January 2028, ahead of the CY28 summer season.

Initially, the JV is expected to cater to 15-20% of Voltas' own compressor requirement. Management indicated that Voltas will face no restriction on compressor imports given its commitment to domestic compressor manufacturing. While the current QCO permits imports of up to 30% of FY25 volumes, companies undertaking domestic manufacturing are exempt from this cap.

This gives Voltas flexibility to continue imports until the JV ramps up, alongside domestic capacity already secured with Highly and GMCC. Of the JV's production, 50-60% is likely to be consumed by Voltas, with the balance supplied to other brands. The company is currently not evaluating refrigerator-compressor opportunities.

Data centres, exports among growth opportunities

Nuvama also highlighted a significant data centre opportunity over the next 2-3 years, while management sees exports, commercial air conditioning and domestic MEP as longer-term growth opportunities.

For its September 2027 target price of Rs 1,220, Nuvama is valuing the UCP and MEP & engineering segments at 38x and 25x September 2027E PAT, respectively. It has also assigned a 1.5x sales valuation to Voltas' stake in VoltBek.