Buy Voltamp Transformers; target of Rs 1510: Prabhudas Lilladher

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Prabhudas Lilladher’s research report on Voltamp Transformers

Voltamp reported strong set of numbers for 4QFY19 with revenue/PAT up 18%/60% YoY. The company has healthy order back log of Rs5 bn (executable over next 3 quarters). We expect Voltamp to report ~8% volume CAGR over next two years (FY19-21E) against CAGR of 6.3% over FY16-19. We expect pickup in tendering activity on the back of higher order finalization post general elections and rising demand from industrial segment due to expanding utilization level. VOLTAMP continues to receive recurring orders from several industries mainly Oil & Gas, Water, Fertilizer and Chemical. Renewables (especially Solar) offers large opportunity from medium to long-term perspective. However, management is cautious and will be bidding selectively due to tariff uncertainty. Overall pricing environment has been challenging for sector which is likely to improve over the next couple of quarters with pickup in demand.

Outlook

We have modelled revenue/PAT to grow at CAGR of 12.3/13.7% over next two years. The stock is currently trading at 12.4/11.3x FY20/21E. We recommend BUY on the stock with revised TP of Rs1510 (14x FY21E).

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