Voltas expects strong RAC sales this summer

Voltas is preparing for a busy summer as demand for room air conditioners (RACs) is expected to increase. The company anticipates strong sales growth due to hotter-than-usual temperatures and early summer heat waves. This growth could benefit its position in the cooling product market. Voltas generates most of its revenue from unitary cooling products, which include room ACs and air coolers. In the first nine months of the financial year, these products accounted for 68% of the company’s total revenue. Among these, room ACs are the primary driver of sales, contributing 60% of revenues in the unitary segment. The company has improved its market share in this area, returning to growth after three years of decline. While the cooling segment is performing well, Voltas has faced challenges in the commercial refrigeration sector. Lower customer spending led to reduced demand, forcing the company to offer promotions that affected profit margins. Despite these hurdles, Voltas's air cooler segment has shown strong growth, doubling its volume last year. The third quarter, typically a weaker period for cooling products, saw revenue for Voltas increase by 20% year-on-year to ₹1,771 crore. However, profit margins fell to 5.9%, the lowest in over four years. The company is prioritizing market share over profits by avoiding price hikes, which may lead to further declines in margins. Looking ahead, strong summer demand for RACs is expected to significantly boost sales. Last year, Voltas set a record with AC sales exceeding 2 million units, continuing a growth trend into this year. The company plans to keep its competitive edge by expanding production capacity and optimizing costs. Concerns remain about reliance on imported components for manufacturing. A slowdown in compressor imports from China could pose challenges, but Voltas is taking steps to reduce this risk by increasing in-house production. Financially, Voltas reported a 28.6% increase in revenue year-on-year, totaling ₹10,645 crore. Net profit surged to ₹599 crore, showing strong growth despite lower margins in the cooling sector. However, the company’s current valuation is high compared to its historical average, suggesting potential challenges ahead. Analysts project continued growth for Voltas, but much will depend on the upcoming summer season.