Buy IMP Powers; target of Rs 158: SKP Securities

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Buy IMP Powers; target of Rs 158: SKP Securities

SKP Securities is bullish on IMP Powers and has recommended buy rating on the stock with a target of Rs 158 in its May 24, 2011 research report.

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SKP Securities is bullish on IMP Powers and has recommended buy rating on the stock with a target of Rs 158 in its May 24, 2011 research report.

"IMP Powers Ltd (IMP) is one of the leading manufacturers of power transformers up to 330 kv class with the market share of around 3%. The company has exited from meters business in FY10. Majority of its revenues come from dominant power sector transformers. IMP has completed its phase - II expansion of transformer capacities at Silvassa, in FY10, enhancing its capacity to 10,000 MVA."

"IMP's top line grew significantly by 34.3% to Rs 832.1 mn during Q3 FY11 on the back of higher volumes and realisations. Sales volume increased to 1,704 MVA in Q3 FY11 from 1,394 MVA last year, an increase of 22.2%. Average realisations improved by 9.7% to Rs 488 per kva. The company sold 4,140 MVA transformers during 9M FY11 amounting to Rs 1972.6 mn. We expect the revenue to grow by CAGR of 29% during the next two financial years led by higher volumes due to demand from SEBs. EBIDTA of the company has increased by 24.8% during the year from Rs 74.3 mn to Rs 92.7 mn. EBIDTA margins dropped down marginally to 11.1% during the quarter due to increase in raw material prices, though EBIDTA margins for 9 months were more or less stabilized at 11.6%. We further expect the EBIDTA margins to remain stable at 11.2% during the next two financial years. PAT increased by 25.3% from Rs 21.1 mn in Q3FY10 to Rs 26.4 mn during the quarter. PAT margin stabilized at 3.2%. We further expect it to grow with the CAGR of 67% during next two years on the back of more or less constant depreciation as there is no expansion announced by the company and its efforts to repay term loans."

"At the current market price of Rs 85, the stock is trading at P/E of 5.6x and 3.8x of FY12E and FY13E earnings of Rs 15.2 and Rs 22.5 respectively. We recommend BUY rating on the stock with a target price of Rs 158/- (86% upside) in 18 months at the P/E of 7x on FY12 earnings," says SKP Securities research report. 

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