Buy Voltamp Transformers; target of Rs 1301: Arihant Capital

Arihant Capital 's research report on Voltamp Transformers

Despite a challenging environment, Voltamp Transformers has reported healthy performance during Q2FY21. Profit for the quarter grew by 54.5% YoY/15% QoQ to Rs 298 mn, driven by cost control measures and higher other income. Sales of the company decreased by 18% YoY to Rs 1,602 mn, largely due to delay in acceptance of delivery and disrupted supply chain amidst covid pandemic. However, operations have started resuming gradually with enquiry and order finalization taking place on project progress basis. On a sequential basis sales bounced back quickly and grew by 122%. Other income for the quarter grew by 57% YoY to Rs 156 mn. In H1FY21, company has reported gain of Rs 208 mn under other income towards appreciation in value of investments. EBITDA grew by 5% YoY to Rs 219 mn with EBITDA margins expansion of 295bps YoY to 14%, on account of lower RM cost and decline in other expenses (-22% YoY).

Outlook

However, Gross margin of the company increased by 342 bps YoY to 26%. We upgrade our rating to Buy from Accumulate with a target price of Rs 1,301.