Voltas shares up 23% from Feb low; can this Tata stock gain further on summer demand?

Tata group stock Voltas Ltd has surged 23 per cent from its February low but analysts see more upside on the counter amid hopes of strong demand this summer. They noted that the refrigeration and air conditioning (RAC) company is outperforming RAC peers and maintaining market share, adding that the recent relaxation of import norms for compressors is a big positive.   

Production costs have gone up for Voltas due to rupee depreciation and rise in commodity prices but the company has not taken any meaningful price hikes so far, compared to 3-5 per cent price hikes taken by its peers. Its focus remains on absolute profit growth over margins, although margins should improve sequentially due to operating leverage, according to management.

In its business update, Voltas said it saw its RAC revenue growing at 35 per cent in the April 2024–February 2025 period against a 30 per cent growth for the industry. The management felt there were misplaced concerns over the recent market share loss in January and February, as its share in these two months is usually low every year and recoups only from April onwards. 

There are also concerns over a decline in compressor imports from China in the December quarter, but the management has indicated that it has successfully managed the situation for the ongoing summer season through alternate sources. It believes that the government will allow imports to continue until domestic capacities are sufficient to meet the demand.

"No specific comment on extent of compressor availability with it, but we draw comfort from its guidance of outstripping RAC industry growth in future (further market share gains) while focusing on absolute profit growth. No provisioning towards recent adverse UAE court order in Q4FY25 is a further positive," Nuvama Institutional Equities said.

MOFSL said the management believes that current demand trends for RAC remain strong, and its focus will be on growing faster than its peers. While market share will be prioritised over margins, Voltas aims to increase value engineering to save costs and protect margins, rather than opting for price hikes, which could impact margins, MOFSL said. 

"The government has relaxed import norms for compressors above 2 tons (10 per cent of the industry's volumes) and the industry is awaiting approvals for compressors below 2 tons. We expect Voltas to benefit from a strong start to the summer season and anticipate the UCP segment's margin to be 7.5 per cent in 4QFY24. We reiterate Buy on the stock with a TP of 1,710 based on SOTP," MOFSL said.

Nuvama said without quantification, Voltas guided for sufficient availability of compressors for itself for the season and hinted at market share gains. The company continued to evaluate various options -- including joint venture and technology transfer arrangement, from a long-term supply security perspective. 

"The government waived the BIS certification for compressors for above 2 tons (10 per cent of the total industry) yesterday and the industry hopes for similar benefits to be extended to below 2 tons SKUs given inadequate domestic availability (requirement of 13–14mn pieces versus 7–8mn piece capacity)," Nuvama said.

This brokerage has retained its ‘Buy’ rating on the stock with a March 2026 target price of Rs 1,810.

Nomura India suggested a target of Rs 1,404 on the stock. "The stock’s current valuation at 31 times FY27 offers a favorable risk-reward trade-off, in our view. We maintain our Neutral rating on Voltas, based on our target P/E of 35x/15x/15x for UCP/Project/Service applied to FY27F EPS and value VoltBek (unlisted) at INR122 per
share to arrive at our target of Rs 1,404," Nomura said.