While Voltas domestic business is likely to take time to recover, international outlook has improved on back of FIFA World Cup 2022 in Qatar and World Expo 2020 in Dubai. These events are likely to have multiplier effect, in our view, spurring investment activity in the region beyond Qatar and Dubai. With improving business scenario in West Asia along with better profitability and return ratios expected going forward, we are turning positive on Voltas project business. We anticipate project business margins to improve ~400 bps over FY14-16e, RoE and RoCE are likely to surge over 440 bps and 640 bps, respectively, in the same period.
We recently met Voltas management to get an update on the companys businesses. Management indicated improved traction in international projects business riding robust order inflow. Voltas international order inflow surged significantly in H1FY14, after several tepid quarters. Dubai Expo 2020 and the Football World Cup 2022 (Qatar) will be a further shot in the arm for the region. Total spending on the two mega events is likely to top $120 billion (Qatar) and $43 billion (Dubai). Ergo, ordering activity in the Middle East is expected to get a humungous leg up given the events potential multiplier effect. The real estate market is already indicating uptick in new construction and rentals.
- By Edelweiss