Emkay Global Financial Services has downgraded Voltamp Transformers to hold rating with a target price of Rs 955, in its report dated August 3, 2010.
"Voltamp reported numbers which were significantly below expectations mainly due to much lower EBITDA margins. It reported 15% yoy growth in revenues to Rs 1.2 billion which was slightly lower than our expectations of Rs 1.3 billion. The revenue growth was driven by 20% yoy volume growth to 1908MVA. At CMP of Rs 945, the stock is trading at 12.9xFY11E earnings, 2.3xFY11E Book value (ROE of 20%) and 7.7xFY11E EBITDA. On EV/EBITDA basis, the stock is trading at 8% premium to peers. We have valued Voltamp at 10% premium (considering strong balance sheet and track record) to peers, on EV/EBITDA basis. However, we do not see significant upside from the current level and downgrade the stock to hold rating, retain our price target of Rs 955/Share (8xFY11E EBITDA), " says Emkay Global research report.
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