Prabhudas Lilladher's research report on Voltamp Transformers
Voltamp Transformers reported strong quarterly performance above our and street estimates owing to ramp up in dispatches, execution and higher other income. Revenue grew 26% YoY to Rs2.8bn led by strong execution. Steep rise in RM cost such as copper, silicon steel, conventional steel, etc. from Oct’20 impacted EBITDA margins (down 510bps YoY) as management decided to execute fixed price contracts, giving preference to its commitment and long term customer relationships. Despite pandemic, the company secured orders worth ~Rs4bn in 4Q and further is negotiating prices for its orders worth Rs500mn (stuck in delayed delivery) due to non-receipt of manufacturing clearance from customers. OB stands strong at Rs6.5bn (excluding renegotiation orders) providing revenue visibility for next few quarters. Going ahead, company expects sectors like infra, water, power, mining, oil & gas, ports, pharma, data centers, etc. to be major growth drivers.
The stock is currently trading at valuations of 14.1x/10.9x FY22E/23E earnings, however, owing to recent run up in the price we have revised our rating from ‘Buy’ to Accumulate with revised TP of Rs1,565 (Rs1,466 earlier).