Voltas Ltd’s Q4FY11 revenue grew by 16.4%YoY to Rs16.8bn. As expected, OPM contracted by 210bps to 8.4% dragged by Electro-Mech segment (PINCe 8.6%). Lower operating profit coupled with higher interest charges translated in a 23.9% fall in adj. net profit to Rs961mn (PINCe Rs882mn). Reported net profit was Rs1.0bn including exceptional income of Rs77mn.

Muted performance by Electro-Mech (MEP) segment:

Revenues from MEP segment (contributes ~57% to topline) grew by 2%YoY. PBIT margin for the segment contracted by 184bps to 8.3% on the back of lesser revenue booking, higher raw material cost and loss of Rs160mn in Rohini Industrial Electricals. This led to 16.6% de-growth in PBIT from this segment resulting inYoY decline in net profit for the company.

Strong Revenue growth from Engineering/Cooling segments:

Revenues from Engineering segment grew by 45.2%YoY driven by mining & construction, material handling business. Also, Cooling segment posted strong growth of 44.7%YoY in Q4FY11. However, PBIT margins for the segments fell by 599bps and 133bps respectively mainly due to higher raw material prices.

Strong order inflows:

Total order book for MEP segment as of Q4FY11 stands at Rs49bn (up 4%YoY and 4%QoQ) out of which, domestic orders comprise of Rs20bn. Order inflows in the quarter of Rs11bn (up 175%QoQ) includes ~Rs2bn Metro Rail project and another ~Rs2bn order from Middle East.

Outlook:

Pickup in industrial activities and volume traction in cooling product division promise better performance for Engineering and Cooling segments. Rohini Industrial Electricals is expected to see a turnaround in FY12 which should provide support to MEP segment. Strong order inflow in the current quarter provides further upside.