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Sound performance in a challenging quarter

Our view

Voltamp Transformers (VAMP) reported a strong set of numbers owing to ramp up in dispatches, robust growth in realizations (49% YoY/15% QoQ) and execution along with healthy operating margins despite a challenging environment. Order book remains strong at ~Rs7.4bn (0.6x TTM revenue) as on 1QFY23, providing revenue visibility for the next few quarters. Enquiry pipeline continues to remain buoyant on the back of capex investments across sectors such as infra, water, power, mining, oil & gas, ports, pharma, data centers, etc. However, the company’s key focus in FY23 would be to protect margins by closely monitoring supply chain and sourcing inputs at competitive costs.

We believe the company is one of the best plays forfuture upturn in industrial demand given its industrial focused business model. We remain positive on the company considering 1) its strong business model, 2) debt free balance sheet and 3) consistent free cash flow generation (current cash + investment ~Rs5.8bn). The stock is currently trading at valuations of 17.9x/14.8x FY23E/24E and excl. other income it trades at P/E of 18.8x/14.9x FY23E/24E. With the recent run up in the stock price, we downgrade it to NEUTRAL (previously BUY) with a revised TP of Rs3,046 (previously Rs2,540) valuing it 16x FY24 EPS.

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