Hold Voltamp Transformers; target of Rs 10,018: Prabhudas Lilladher

Prabhudas Lilladher's research report on Voltamp Transformers

We revise our FY25/26E EPS estimates by +3.5%/5.8% factoring in strong demand outlook and healthy expected volume growth. Voltamp Transformers (VAMP) reported mixed quarterly performance with revenue growth of 14.6% YoY and EBITDA margin contraction of 112bps YoY to 20.0%. Demand momentum is likely to sustain on the back of strong public & private capex. Although near-term order booking may be slow due to ongoing elections and rising commodity prices, the enquiry pipeline remains healthy across sectors such as Data Centers, Steel, Metals & Mining, Commercial Real Estate, Green Energy, Oil & Gas, etc. However, with rising competitive intensity, margins are expected to normalize at lower than current levels going forward. The company’s large installed base of over ~80,000 transformers will aid growth in the its high-margin service business. 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 service business.

Outlook

The stock is currently trading at a P/E of 34.5x/29.9x FY25/26E. We roll forward to FY26E and re-assign a ‘HOLD’ rating with a TP of Rs10,018, valuing it at a P/E of 30x FY26E on account of a robust longterm demand outlook.