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Voltamp Transformers Ltd. reported another strong print during Q2 FY24 driven equally by both volume and realisation (+20% YoY). The company reported a decadal high Q2 gross margin aided by easing of commodity cost pressures amid a strong demand environment.
Order Inflow of~Rs 9 billion and revenue visibility of Rs 14.9 billion (up 25% QoQ) augurs well for strong performance for the next few quarters.
Looking forward Voltamp Transformers 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.
Voltamp Transformers is currently trading at valuations of 20.3 times/16.1 times FY24E/25E and excluding other income it trades at price/earning of 27.1 times/21.1 times FY24E/25E EPS.
We maintain our ‘Buy’ rating with a revised target price of Rs 5,836 based on 20 times FY25E earnings.
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