Hold Voltamp Transformers; target of Rs 4611: Prabhudas Lilladher

Prabhudas Lilladher's research report on Voltamp Transformers

Voltamp Transformers (VAMP) reported strong quarterly performance with revenue growth of 19.3% YoY, volume growth of ~15% YoY and EBITDA margin expansion of 147bps YoY to 14.9%. Focus on cost optimization, order selection (better margins and receivables visibility) and supply chain management is likely to aid profitability and working capital cycle going forward. Enquiry pipeline continues to remain strong for next couple of years from sectors such as Steel & Metals, Commercial real, Green energy, Sugar, Cement etc. driving order inflows. Also, started focusing on exports markets again (avoided exports for last 2 years due to logistic issues) and targeting market like Africa and Asia. We remain positive on VAMP considering its 1) strong market position in industrial transformers, 2) robust business model, 3) debt free balance sheet, 4) consistent free cash flow generation, and 5) healthy enquiry pipeline. We revise our estimate by 3.7%/4.8% for FY24/25, factoring in continued healthy demand outlook, normalizing supply chain (CRGO lamination) and increasing utilization of Savli plant. The stock is currently trading at PE of 24.1x/20.8x FY24/25E.

Outlook

We maintain Hold rating on stock with TP of Rs4,611 (Rs 3961 earlier), valuing it at PE of 20x FY25E (18x earlier), owing to improved business outlook.

For all recommendations report, click here