On Monday, Axis Capital (NYSE:AXS) Limited revised its stance on Voltas Ltd. (VOLT:IN), downgrading the stock from a Buy rating to an Add rating, while setting a new price target of INR 1,600. This adjustment follows a notable 14% increase in the stock's value over the previous month.
The firm's analysis anticipates that Voltas will gain from a growing market for room air-conditioners (RAC), with projections of 20% and 23% compound annual growth rates (CAGRs) in revenue and EBIT, respectively, for its Unitary Cooling Products (UCP) business. Moreover, Axis Capital foresees improved discipline in the bidding process for Mechanical, Electrical, and Plumbing (MEP) projects by Voltas.
Voltas is reportedly shifting its focus to projects where it can serve as the main contractor, which is expected to substantially reduce credit risk. The company is also aiming for a turnaround in its MEP business segment.
Despite these positive developments, Axis Capital has adjusted its recommendation due to limited upside potential, even though it values the UCP business at 50 times the June 2025 estimated earnings and the non-UCP segment at 25 times the same metric.
The new stock price target of INR 1,600 reflects this tempered outlook, suggesting that while the firm acknowledges the potential growth and strategic shifts within Voltas, it believes that the recent price surge has captured much of the anticipated value. The Add rating indicates that Axis Capital still sees some potential for the stock to offer returns, albeit to a lesser extent than previously estimated.
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