Buy Voltamp Transformers; target of Rs 1244: Prabhudas Lilladher

Prabhudas Lilladher's research report on Voltamp Transformers

Voltamp Transformers reported a healthy set of numbers despite pandemic led by improved gross margin and higher other income thereby boosting profitability. Based on our estimates, order inflow stood at ~Rs139mn (down ~94% YoY) as on 1QFY21, translating order backlog to Rs4.1bn (executable over next two-three quarters). On the order inflow front, management highlighted that enquiries remain decent but finalization is taking time due to delay in decision making. We expect Voltamp to report muted volume CAGR over next two years (FY20-22E) owing to weak economic environment. Management indicated that once the situation starts normalizing they expect sectors like Infra, Water, Mining, Oil & Gas, Airports, Defence, Pharma, Chemicals, Data Centers and Renewables to improve going ahead.

Outlook

We remain positive on the company due to strong business model, debt free balance sheet and consistent free cash flow generation (current cash + Investments of ~Rs5.4bn). We have modelled revenue/PAT to grow at CAGR of 5%/8% over next two years. The stock is currently trading at attractive valuations of 13.1x/10.6x FY21E/22E. We maintain BUY rating on the stock with TP of Rs1244.