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Our view

Voltamp Transformers (VAMP) reported another strong print during Q1FY24 driven by volume-led revenue growth (+19% y/y). The company reported a decadal high Q1 EBITDA margin aided by easing of commodity cost pressures amidst a strong demand environment. An order book of ~Rs11.9bn (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

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% EPS CAGR 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 16.3x/13.0x FY24E/25E and excl. other income it trades at P/E of 20.9x/16.5x FY24E/25E EPS. We maintain our BUY rating with a revised TP of Rs5,836.

Result Highlights

* Sales grew by 19% YoY to ~Rs3.2bn (YSLe: Rs3.3bn) on the back of 15% YoY volume growth at 2,751 MVA

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

* EBITDA came in at Rs480mn (up ~32% YoY) (YSLe: Rs556mn) with EBITDA margins coming in at 14.9%, a ~150bps YoY expansion. Other expenses grew by 42% YoY

* PBT grew by 105% YoY to Rs685mn driven by higher other income which came in at Rs108mn vs a negative Rs4mn in 1QFY23

* As a consequence, PAT grew by 90% YoY to Rs508mn (YSLe: Rs497mn)

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