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Target: ₹3,610
CMP: ₹2,717.85
We initiate coverage on Voltamp Transformers (Voltamp) with a Buy rating and an SOTP-based target price of ₹3,610. The company is a key player in the transformer manufacturing space with a domestic market share of 15 per cent (as per management), catering to diversified sectors (85 per cent of revenue comes from private customers).
Over the years, Voltamp has developed strong relationship with clients, which has helped it have a large installed base of >60,000 transformers (as of Mar’22) across sectors in India and overseas markets.
We believe Voltamp stands to be a key beneficiary of energy transition, private capex revival and PLI initiatives of the government in the manufacturing space.
Company’s current orderbook at about ₹900 crore, strong balance sheet and improved outlook on profitability would likely keep earnings growth strong in the next three years. We have modelled a revenue/earnings CAGR of 11 per cent/16 per cent over FY22-FY25.
Further, pick-up in power distribution capex and investments in the manufacturing sector could lead to growth in Voltamp’s orderbook. We believe any new capacity addition plans by the company could be a positive trigger going ahead.
Intense competition, higher raw material prices and slow-down in industrial capex are the key risks.
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