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Manish Bhatt
(Prabhudas Lilladher) |
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The company has order book of Rs 3.6 billion. It manufactures transformers upto 220 kV Class, having an installed capacity of 7,200 MVA transformers per annum. The company is raising money for enhancing capacity to 400 KV class transformers with 16000 MVA per annum.
It has reported revenues CAGR of 66% from 2003-07, EBITDA by 523 basis points and PAT CAGR of 64% in same period. It is an excellent issue. One should apply for the same. |
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SP Tulsian
(Investment Advisor) |
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Transformers And Rectifiers (India) is setting up a new plant of 220 kV and 400 kV class with a capacity of 16,000 MVA per annum with estimated outlay of Rs 67 crore. Rs 35 crore is earmarked for enhanced working capital requirements. In transformer industry, though capital cost is low, it has huge working capital requirements, due to longer credit availed by its buyers like State Electricity Board. The debtor cycle is generally of 4 months. The new plant would be partly operational in FY 09.
The growth of the company in FY 08 is lower against industry and peer growth. Based on H1 results of FY 08, the topline of the company maybe about Rs 280 crore with PAT of Rs 28 crores which would translate into an EPS of Rs 28. Based on this, and at the upper band of Rs 465, the share is issued at abut 17 PE multiple.
When we compare this with listed peers, this looks almost fully priced, thus leaving very little room for appreciation. Indo Tech Transformers, having highest EBITDA margin in the industry is likely to post an EPS of Rs 42 for FY 08 and share is now ruling at Rs 700, resulting in a PE multiple of 17 times. Bharat Bijlee is likely to post an EPS of Rs 150 for FY 08, rules at Rs 3,440, resulting in a PER of 23 times. Voltamp Transformer is ruling at PER of 21 if EPS of Rs 85 is considered for FY 08. Though Voltamp and Bharat Bijlee are quite large compared to the company, Indo Tech could be the right companion.
Indo Tech has also been carrying out expansions and raising its operations with improved profitability. It is available at a same PER of 17 in the secondary market, hence the issue at PER of 17 looks expensive. However, promoter's stake of 77% instills confidence against 54% held in Indo Tech Transformers. The track record of the promoters also needs to be closely watched, post IPO.
The company falls in highly fancied sector of Transformer, which is discounted favourably by the market. But issue at upper band of Rs 465 is issued at a PE multiple of close to 17, leaving very little room for appreciation. Similar plays are available in the secondary market almost at the similar valuations. So, where is the room for appreciation for new set of investors? |
