Buy Voltamp Transformers; target of Rs 10,285: Prabhudas Lilladher

Prabhudas Lilladher's research report on Voltamp Transformers

We revise our FY25/26E EPS estimates by -2.5%/-3.6%, factoring in expected margin normalization driven by a moderation in realizations against high base. Voltamp Transformers (VAMP) reported a strong quarterly performance, with revenue growing 23.9% YoY and EBITDA up 15.5% YoY. The company’s outlook remains positive, supported by strong demand from sectors such as data centers, steel, cement, and green energy, while commercial and industrial projects are expected to boost demand for IDT transformers. However, margins are expected to normalize going ahead due to a high base and rising competition. The company maintains contingency inventory of key raw materials like CRGO to mitigate supply chain risks. With a focus on 100% capacity utilization and a selective order booking strategy capped at a ninemonth delivery period, management remains confident in the availability of profitable growth opportunities, ensuring healthy visibility ahead.

Outlook

We remain positive on VAMP considering its 1) strong market position in industrial transformers, 2) healthy demand momentum, 3) debt-free balance sheet, 4) consistent free cash flow generation, and 5) growing high-margin services business. The stock is trading at a P/E of 25.2x/22.3x FY26/27E. We maintain ‘Buy’ rating and roll forward to Mar’27E valuing the stock at a PE of 28x FY27E (33x Sep’26E earlier) with a revised TP of Rs10,285 (Rs11,437 earlier).

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