Accumulate Voltamp Transformers; target of Rs 2220: Prabhudas Lilladher

Prabhudas Lilladher's research report on Voltamp Transformers

Voltamp Transformers (VAMP) reported a strong quarterly performance with revenue growth of 36.3% YoY and margin expansion of 559bps YoY to 17.2%, owing to gross margin expansion and lower employee cost. Order inflow came in at Rs3.4bn in Q4FY22 down ~14% YoY, owing to customer reluctance in placing orders amid higher commodity costs. FY22 order inflow came in highest ever at Rs13.5bn, translating to Order book of Rs6bn (down 7% YoY). Enquiry pipeline remains healthy thereby providing good order inflow visibility in medium term. However, higher commodity price, supply chain disruptions and overall inflationary environment is likely to defer corporate capex decisions in near term. Sectors such as Sugar, Ethanol, Datacenter, Wind, Solar, Chemical, Steel, Cement and Telecom to be main growth drivers going forward. Considering current challenging environment, management has reworked its short term strategy with focus on short cycle executable orders, with assured payments terms. However, competition intensity has increased, thereby impacting pricing, which will likely impact volumes in near term.

Outlook

We remain positive on the company considering 1) its strong business model, 2) debt free balance sheet and 3) consistent free cash flow generation. We expect revenue/PAT CAGR of 12%/10% between FY22-FY24E. The stock is currently trading at PE of 15.4x/12.6x for FY23E/FY24E. Maintain ‘Accumulate’ rating on stock with revised TP of Rs2,220 (earlier Rs2,215), valuing at PE of 14x FY24E.

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