Voltas Ltd’s shares fell about 5% on Monday after it put up a weaker-than-expected show in the June quarter (Q1FY26) and management commentary pointed to a slow recovery.
Consolidated total operating revenue fell 20% year-on-year to ₹3,939 crore, but the bigger disappointment was the much steeper 58% fall in Ebitda to ₹179 crore, with margin plunging 408 basis points (bps).
Expectations from Q1 results were already low owing to a dull season, marked by the delayed onset of summer, relatively milder temperatures and early monsoon. This hurt demand for cooling products such as air conditioners. Plus, it didn’t help that last year’s June quarter had seen sharp growth, leading to a high base.
Voltas’s unitary cooling product (UCP) segment, which comprises room air conditioners (RAC) and other cooling products, saw a 25% year-on-year drop in Q1FY26 revenue to ₹2,868 crore, with Ebit margin dipping nearly 500 bps to 3.6%. Note that Q1FY25 UCP revenue had increased a solid 51% as soaring temperatures and heat waves had boosted air conditioner sales back then.
This year, amid tepid sales, inventory across trade channels remained elevated. Voltas made tactical interventions to support secondary offtake and scaled back factory operations to avoid overproduction. This under-absorption of fixed costs along with higher warehousing and holding expenses, hurt Q1FY26 profit margin.
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Earnings missed the beaten-down expectations, prompting many analysts to trim their future estimates. Motilal Oswal Financial Services has cut its earnings per share estimates for FY26 and FY27 by about 9% and 5%, respectively, to reflect the Q1 underperformance and UCP segment’s lower margins.
Voltas’s electro-mechanical projects and services business was broadly steady in Q1, while engineering products and services segment faced challenges influenced by macroeconomic trends and industry-wide pressures.
Moving ahead, the management expects inventory normalization, cost control measures and demand rebound in the upcoming festive period to support sequential recovery.
To be sure, Voltas’s shares are down 33% so far in 2025. The stock trades at 36 times FY27 estimated earnings, as per Bloomberg. This valuation isn’t cheap, especially when recovery could be painfully slow.
Nomura Research has lowered its FY26 RAC industry growth forecast to 5% year-on-year (10% earlier). “High channel inventory and weak consumption demand remain near-term risks. High competition may make market share recovery difficult for Voltas and lead to margin risks as well, given increased backward-integration initiatives,” said the broking firm’s report dated 9 August.
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