Hold Voltamp Transformers; target of Rs 5079: Prabhudas Lilladher

Prabhudas Lilladher's research report on Voltamp Transformers

We revise our FY24/25E estimates by 16.5%/3.9% post factoring in healthy H1FY24 performance, continued healthy demand outlook, normalizing supply chain, softening commodity prices and increasing utilization of Savli plant. Voltamp Transformers (VAMP) reported strong quarterly performance with revenue growth of 20.1% YoY, volume growth of ~10% YoY and EBITDA margin expansion of 343bps YoY to 14.9%. Enquiry pipeline continues to remain strong for next couple of years from sectors such as Data centers, Steel & Metals, Commercial real, Green energy, Sugar, Cement, refinery etc. thereupon driving order inflows. However, competition intensity has increased with revival of old players and rising Chinese/Unorganized players thereby impacting pricing power.

Outlook

We remain positive on VAMP considering 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. The stock is currently trading at PE of 21.5x/20.8x/18.6x FY24/25/26E. We roll forward to Sep’25 and maintain ‘Hold’ rating with TP of Rs5,079 (Rs4,611 earlier), valuing at PE of 20x Sep’25E.