Prabhudas Lilladher's research report on Voltamp Transformers
Voltamp Transformers (VAMP) continued its execution momentum and reported a healthy revenue growth of 66.9% YoY to Rs2.7bn with EBITDA margins of 13.4% in Q1FY23. We believe legacy fixed price orders have been completed, which were dragging margins and with new orders now getting executed margins are expected to remain stable from H2FY23. However, sourcing key import origin raw material i.e. CRGO electrical steel sheet and transformer oil at budged cost along with increasing completion intensity may pose challenges. Company highlighted it has been focusing on industries, end users and limiting exposure to long EPC infra projects to protect margins and improve cashflows. Enquiry pipeline remains strong from sectors such as data center, solar, chemical, water, sugar (Ethanol blending), commercial real estate, textile etc. and will drive ordering activity going forward. We remain positive on the company considering 1) its strong business model, 2) debt free balance sheet, 3) consistent free cash flow generation, 4) reviving margins profile and 5) healthy enquiry pipeline.
Given the reviving margins profile, healthy enquiry pipeline and strong balance sheet, we revise our estimates upwards by 7.5%/8.3% for FY23/24E. The stock is trading at PE of 20.2x/16.4x FY23/24E. We assign ‘Hold’ rating (earlier Under Review) on stock with TP of Rs2,748, valuing it at PE of 16x FY24E.
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