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Kotak Securities
Voltamp (Buy)
CMP: ₹1,064.4
Target: ₹1,248
Voltamp Transformers Ltd is engaged in the manufacturing of electrical transformers. The company’s products include Oil Filled Transformers, Cast Resin Transformers, Unitised Sub-Station, Induction Furnace Transformers and Lighting Transformers.
Voltamp reported weak set of numbers as production was impacted by GST-related uncertainty. This saw the clients delaying giving manufacturing clearance to the company. Even major demand drivers such as Solar power witnessed slowdown due to increase in tax incidence under GST. The business outlook shared by the management was also weak. We have, therefore, reduced our earnings projections.
Yet, we believe, valuations are not costly for the company given excellent management pedigree and strong balance sheet. Hence, maintain ‘Buy’ with revised target price of ₹1248 (₹1,452 earlier), which values the stock at around 15x FY19 earnings.
Voltamp stands out among the small-cap transformer companies in terms of quality of management and strength of balance sheet (zero debt and cash & liquid investments of about ₹310 crore).
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