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Multi Baggers

Sushil Finance

12.00 AM Mar 24th

Voltamp Trans

BSE ID : 532757     NSE ID : VOLTAMP

RECOMMENDED PRICE 950.30

PEAK FROM RECO 1367.00 43.85%

CURRENT PRICE 1050.00 10.49%

The transformer segment has been witnessing some pick-up in ordering scenario over the last few quarters. Considering the growth visibility, we maintain BUY on the stock with price target of Rs 1160.

Voltamp Transformers

The transformer segment has been witnessing some pick-up in ordering scenario over the last few quarters. Considering the growth visibility, we maintain BUY on the stock with price target of Rs 1160.

The Company has reported slightly weak set of numbers for the quarter ended December’16 with top-line de-growth of ~25% YoY. We conducted the conference call with the management & following are the key highlights.

Key Highlights of Q3FY17 & 9MFY17 results

Revenues de-grew by 25% YoY to Rs.1053 mn which to an extent got impacted by 1. Labor issues at Savli plant wherein the operations were suspended for ~11 days in the quarter & 2. Higher base-effect due to spill-over of some contracts from Q2FY16. However, considering the 9MFY17 performance & current order visibility, management remains confident of achieving its top-line guidance of Rs.6 bn in FY17E.

Order Book stands at Rs.3.8 bn (~6185 MVA), providing visibility over next 4-6 months. Management has been witnessing some improvement in the ordering scenario; however consistency still remains an issue. Lower demand coupled with higher competitive scenario has resulted in subdued realizations.

According to management, there has been good traction in tendering from the State Transcos, however margins are lower due to higher competition & hence the Company has been very selective in bidding. Renewable space i.e. Wind & Solar has witnessed huge ordering over the last few quarters with Company expecting the segment to contribute ~20-22% to its FY17 top-line. Though there has not been any meaningful pick-up in the private capex, however, with some revival the Company has been able to receive orders from various industries like Cement, Metal, Infra etc. UDAY has not yet picked up as per the expectations & hence benefits remain limited.

Operating profit declined by 10% YoY to Rs.100 mn whereas margins improved by 150 bps to 9.5%. Management expects to deliver ~9-10% operating margins going forward. PAT grew by 32% YoY to Rs.153 mn on back of higher other income (up ~70% YoY to Rs.108 mn) & lower tax outgo. EPS for the quarter stood at Rs.15.1 vs Rs.11.4 in Q3FY16.
9MFY17 Results- De-growth on quarterly basis impacted the 9MFY17 performance wherein revenues grew by mere 6% YoY to Rs.3812 mn. Higher gross margins (up 340 bps) resulted in healthy operating profit growth of ~50% to Rs.287 mn while margins improved by 220 bps YoY to 7.5%. Higher other income led to strong net profit growth which grew by ~83% YoY to Rs.454 mn. EPS for 9MFY17 stood at Rs.45 vs Rs.25 for 9MFY16.

Outlook and Valuation

After a prolonged slowdown, the transformer segment has been witnessing some pick-up in ordering scenario over the last few quarters. Increasing focus on T&D, higher traction in renewable space along with gradual recovery in industrial space is likely to offer good opportunities for players like Voltamp. Though the current quarter has been slightly weak, we expect the Company to perform well over the next few years. Strong balance-sheet coupled with prudence working-capital management provides further margin of safety. At the CMP of Rs.952, the stock is attractively trading at 15.9x & 13.3x its FY18E & FY19E EPS of Rs.60 & Rs.72 resp. Hence considering the growth visibility, we maintain BUY on the stock with price target of Rs 1160.

For full details, Click on the attachment.

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