Voltas and Blue Star, the country’s leading air conditioning and cooling solutions companies, reported their March quarter (Q4FY25) results last week, with earnings broadly in line with analyst expectations. However, the Street appeared disappointed with the outlook, as a delayed summer and weaker-than-expected April sales cast a shadow over the companies’ peak season performance in Q1FY26.
Industry experts stated that demand for cooling products such as air conditioners (ACs) is expected to be weak in the ongoing quarter due to a mild start to summer, particularly in the South — a key region that accounts for 30% of industry sales.
The management of Blue Star also highlighted a weak start to the summer, with sales in April growing only 5% year-on-year (YoY), compared to initial expectations of 20–25%.
Incorporating the potential impact of weak numbers, brokerages have cut their target prices on both stocks. JM Financial cut its target price for Blue Star share price to ₹1,900 from ₹2,015, while maintaining its ‘Buy’ rating. Jefferies also revised Blue Star’s price target to ₹1,900 from ₹2,230, retaining a ‘Hold’ rating.
Likewise, Centrum Broking revised its target price on the stock to ₹1,725 per share, maintaining an ‘Add’ rating.
Voltas share price also saw a target price cut by JM Financial, which lowered its estimate to ₹1,405 from ₹1,470, while retaining a ‘Buy’ rating.
Centrum Broking trimmed its target for Voltas share price to ₹1,390 from ₹1,430, keeping its ‘Add’ rating, while Jefferies revised its target to ₹1,790 from ₹1,990, maintaining a ‘Buy’ stance. Nomura also lowered its target price for Voltas to ₹1,290 from ₹1,404.
Voltas: RAC growth outlook uncertain amidst weak start to summer
Voltas Q4FY25 sales grew 13% YoY to ₹4,770 crore, broadly in line with Centrum Broking’s estimates. Its Unitary Cooling Products (UCP) segment sales rose 17% YoY to ₹3,460 crore, slightly below the brokerage’s expectations, driven by RACs, air coolers, and commercial ACs.
The EMPS (Electro-Mechanical Projects and Services) segment saw a 4% YoY increase in sales to ₹1,140 crore. Gross margin expanded by 160 basis points YoY to 21.4%, while EBITDA margin rose by 250 basis points to 7% on a low base.
The UCP margin improved 80 basis points to 10%, whereas the EMPS segment reported an EBIT loss of ₹1.7 crore due to a ₹40 crore provision for expected credit loss related to projects in GCC countries.
Voltas’ net profit jumped 107% YoY to ₹240 crore, driven by higher other income. Although the summer season started on a weak note (with April sales impacted), the company remains optimistic about a rebound in May–June. It has not taken any price hikes so far but may consider them if necessary.
Blue Star: Hazy summer could curtail RAC growth
Blue Star’s revenue for Q4FY25 grew 21% YoY to ₹4,020 crore, in line with Centrum Broking’s expectations. EMPS revenue jumped 31% YoY to ₹1,970 crore, driven by strong execution and exceeding brokerage estimates.
Unitary Products segment sales grew 15% YoY to ₹1,960 crore, falling short of Centrum’s forecast of 23% growth. Gross margin contracted by 60 basis points YoY to 23.1%, while EBITDA margin slipped 30 basis points to 7%, partly due to a less favorable product mix with a lower share of unitary products.
Net profit rose 21% YoY to ₹190 crore. The brokerage noted that unseasonal rains led to a 15–20% decline in the RAC industry in April. Blue Star managed to grow both primary and secondary sales by 5%, though short of its 30% target. With hopes pinned on stronger May–June demand, the RAC industry may see 10–15% growth this summer versus the earlier projection of 20–25%.
Blue Star aims to maintain margins of 8.5% for unitary products and 7.5% for EMPS, although further expansion seems unlikely due to intense market competition.
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