Voltamp Transformers Q1 Results Review - Robust Quarter; Outlook Remains Sanguine: Yes Securities

Yes Securities Report

Our view

Voltamp Transformers Ltd. reported another strong print during Q1 FY24 driven by volume-led revenue growth (+19% YoY). The company reported a decadal high Q1 Ebitda margin aided by easing of commodity cost pressures amid a strong demand environment. An order book of ~Rs 11.9 billion (executable in the current year) and full ramp-up of Savli operations back to normal, augurs well for the company’s near term revenue and margin performance.

Looking forward

Voltamp Transformers' management remains optimistic on the business outlook aided by steady growth in domestic demand from metals, data centres, green energy, pharma, automobiles, etc. Though order booking momentum is expected to sustain, competitive intensity especially in lower voltage class transformers has increased which leaves little room for margin expansion. We are building in a 22% earnings per share compound annual growth rate over FY23-25E mainly driven by revenue growth while margin is expected to remain flat in the near term.

The stock is currently trading at valuations of 16.3 times/13.0 times FY24E/25E and excluding other income it trades at price/earnings of 20.9 times/16.5 times FY24E/25E EPS.

We maintain our 'Buy' rating with a revised target price of Rs 5,836.

Result Highlights

• Sales grew by 19% YoY to ~Rs 3.2 billion (our estimate: Rs 3.3 billion) on the back of 15% YoY volume growth at 2,751 megavolt ampere.

• Gross margins expanded by ~270 bps YoY at 26.9% led by softening of commodity prices.

• Ebitda came in at Rs 480 million (up ~32% YoY) (our estimate: Rs 556 million) with Ebitda margins coming in at 14.9%, a ~150 bps YoY expansion. Other expenses grew by 42% YoY.

• Profit before tax grew by 105% YoY to Rs 685 million driven by higher other income which came in at Rs 108 million versus a negative Rs four million in Q1 FY23.

• As a consequence, profit after tax grew by 90% YoY to Rs 508 million (our estimate: Rs 497 million)

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