VOLTAS

feels the heat in Q1

Q1 FY26 performance fell short of expectations, with management anticipating a slow recovery. Consolidated total operating revenue decreased by 20% year-on-year (y-o-y) to ₹3,939 crore, while Ebitda saw a much steeper 58% fall to ₹179 crore, with the margin plunging by 408 basis points (bps). Cooling Products: The Unitary Cooling Products (UCP) segment, which includes air conditioners (ACs), saw a 25% y-o-y drop in revenue to ₹2,868 crore, with the Ebit margin falling by nearly 500 bps to 3.6%. This was a stark contrast to Q1 FY25, when a strong summer led to a 51% surge in UCP revenue. Weather Impact: The weak results were attributed to a dull season with a delayed summer and an early monsoon, which hurt demand for cooling products. Tepid sales resulted in high inventory levels across trade channels. Voltas reduced factory operations to avoid overproduction, but this led to an under-absorption of fixed costs and higher warehousing expenses, which further squeezed profit margins. Other Segments: The electro-mechanical projects and services business remained stable, while the engineering products and services segment faced challenges due to macroeconomic trends and industry-wide pressures. Recovery Forecast: The company anticipates a sequential recovery, supported by inventory normalization, cost control measures, and a rebound in demand during the festive season. Voltas stock is down 30% so far in 2025 and is trading at 37 times FY27 estimated earnings, which is not considered cheap. Nomura Research has lowered its FY26 growth forecast for the Room AC industry, noting that high competition may make it difficult for Voltas to regain market share.