Voltas Hold Rating Maintained; Target Price at ₹1,441 as GST Pause Hits Demand but Recovery in Sight

Mumbai | September 22
Voltas shares remain under investor focus as the company navigates short-term disruptions from GST 2.0 and elevated inventory levels. Despite near-term challenges, the long-term growth story appears intact, with room air conditioners (RAC), appliances, and commercial AC businesses expected to drive resilience and steady earnings growth.

Demand Pause from GST 2.0 and Inventory Overhang

Voltas’ sales trajectory in Q2FY26 has been impacted by a two-pronged challenge. Primary sales slowed due to higher channel inventory levels, estimated at 2–3 months across the industry, while secondary demand saw a five-week pause as customers deferred purchases ahead of the GST 2.0 tax cuts. The recent GST reduction on RACs and dishwashers from 28% to 18% is expected to reignite demand as festive buying begins. Sequential recovery is anticipated in Q3 and Q4 FY26 as affordability improves.

Voltas continues to hold the top position in the RAC market with an 18% share. Management has reiterated its focus on defending leadership in the 3-star product range while scaling its premium offering. In air coolers, where the company is currently the second-largest player, Voltas aims to secure the number one spot by the end of FY26.

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Growth Strategy and Margin Outlook

Voltas’ stock outlook reflects a strategy anchored on growth in both consumer and commercial segments. In appliances, the company is expanding into a broader portfolio while strengthening its distribution network across more than 150 cities. Commercial air conditioning is expected to deliver 15–20% annual growth between FY26–28, supported by infrastructure demand and project execution.

Margins are forecast to improve gradually as outsourcing of key components and cost-saving measures take effect. EBITDA margins are projected to rise from 6.2% in FY26E to 7.6% in FY28E. To protect profitability, management has indicated potential price hikes from January 2026, with increases of 3–5% in 3-star RACs and sharper adjustments in 5-star models.

Financials and Valuation

Voltas’ financial projections highlight a steady growth trajectory despite the current slowdown. Revenue, EBITDA, and PAT are expected to grow at a CAGR of 9.7%, 11.5%, and 14.9% respectively over FY25–28. Return ratios are also expected to remain healthy, with RoE improving to 15.1% by FY28.

At a current market price of ₹1,420, Voltas trades at 42x FY27E and 37x FY28E earnings. The revised target price of ₹1,441 implies a P/E multiple of 40x Sep’27 earnings, indicating limited near-term upside but stable long-term fundamentals.

In conclusion, while GST-related disruptions and high channel inventory may weigh on earnings in the near term, Voltas’ leadership in RAC, growth ambitions in appliances, and expansion in commercial AC underpin long-term resilience. The stock remains a steady hold for investors looking at structural opportunities in India’s cooling and appliances market.

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