Hold Voltamp Transformers; target of Rs 3055: Prabhudas Lilladher

Prabhudas Lilladher's research report on Voltamp Transformers

We revise our FY23/24/25E EPS estimates by +14.9%/+7.7%/+3.5% given margin revival, strong order book and robust enquiry pipeline. Voltamp Transformers (VAMP) reported healthy revenue growth of 13.5% and EBITDA margin expansion of 458bps YoY. Near term challenges remain due to ongoing labour issues at Savli plant, running at sub-optimal utilization level of 65-70%. It has stopped booking orders since October, which will impact year-end order book position. Further, competition from CG Power’s new factory and restart of 2 other Chinese factories will add some pricing pressure. To protect costs and improve cash flows, the company is focusing on business from corporates/end users and limiting exposure to large EPC firms undertaking long gestation infra projects. We remain positive on VAMP considering its 1) strong business model, 2) debt free balance sheet, 3) consistent free cash flow generation, 4) reviving margin profile and 5) healthy enquiry pipeline.

Outlook

The stock is currently trading at PE of 18.4x/17.0x/14.5x FY23/24/25E. Maintain ‘Hold’ rating on stock with TP of Rs3,055 (Rs3,150 earlier) valuing it at 15x on FY25E.