Accumulate Voltamp Transformers Ltd For Target Rs.10,503 by Prabhudas Liladhar Capital Ltd
Soft Q4, legacy order book & Input cost weigh on margins
Quick Pointers
* Order book stood at Rs12bn (10,270 MVA) while order inflow stood at ~Rs23.2bn for FY26
* Profitability impacted due to rupee depreciation (raising imported RM costs), higher critical component prices, and elevated T-oil costs amid Middle East war tensions
Voltamp Transformers (VAMP) delivered a soft quarter performance with revenue declined by 1.2% YoY and EBITDA margin contracted 377bps YoY due to sharp escalation in transformer oil prices and currency fluctuations led to rise in raw material prices. The YTD order book remains healthy at INR15.1bn (inc. INR3.1bn Apr’26 inflow) reflecting strong demand however ~INR7.5bn of the order book comprises legacy fixed-price orders booked prior to the sharp rise in raw material prices, which is expected to exert near-term margin pressure. Further new order booked at updated cost, implying stable margins on new inflows rather than incremental margin expansion. The new plant, expected to be operational by Jul’26, should support volume growth by catering additional demand from data centers, EPC (ex- Utilties), GETCO and private players, while additional land acquisition capex (~INR250mn) reflects preparedness for future expansion opportunities. Near-term pricing pressure, legacy order backlog execution and supply-chain bottlenecks remain key monitorables, although the demand outlook continues to remain healthy. We revise our FY27-28 EPS estimates by -10.1%/ -3.9% and downgrade our rating from ‘BUY’ to ‘Accumulate’ factoring in margin pressures from legacy orders and supply-chain constraints. We roll forward to Mar’28E, valuing the stock at a P/E of 26x Mar’28E (26x Sep’27E earlier) with a revised TP of Rs10,503 (Rs10,312 earlier). Downgrade to ‘Accumulate’.
Long term view: Near-term challenges persist due to supply-chain disruptions, elevated raw-material prices and rupee depreciation amid ongoing Middle East conflict; however, we remain positive on VAMP considering its 1) strong market position in industrial transformers, 2) healthy demand momentum, 3) debt-free balance sheet, 4) consistent free cash flow generation, and 5) growing high-margin services business. The stock is trading at a P/E of 29.6x/24.8x FY27/28E.
Higher RM cost impacted gross margins: Revenue decreased by 1.2% YoY to Rs6.2bn (PLe: Rs5.8bn). Gross margin contracted by 384bps YoY to 23.0% likely impacted by rupee depreciation leading to higher cost of imported raw materials, along with a sharp increase in critical component costs and elevated T-oil prices amid ongoing Middle East tensions. EBITDA decreased by 21.2% YoY to Rs917mn (PLe: Rs981mn) with EBITDA margin contracting by 377bps YoY to 14.9% primarily due to lower gross margin. PBT (exc. Extra-ordinaries) decreased by 48.4% YoY to Rs774mn (PLe: Rs1.2bn) due to lower other income (-159.2% YoY to (Rs101mn)) likely impacted by MTM losses on G-sec investments arising from the difference between cost and market value. Adj. PAT decreased by 42.9% YoY to Rs553mn (PLe: Rs906mn) dragged by higher effective tax rate (344bps YoY to 28.6%).
Other important points:
* Management reported one-time provisions of Rs48.5mn (revised labour code) and Rs55mn (employee incentives) for Q4FY26
* Voltamp has planned a capex of Rs250mn for the acquisition of a new plot near Vadodara as land bank for future use, which will be funded through internal accruals
Key Takeaways:
* Q4FY26 profitability was adversely impacted by sharp escalation in T-oil prices and rupee depreciation increased cost of imported raw materials amid middle est conflict
* The other income company stood at (INR101mn) due to increase in long term G-sec yields results in negative MTM gains
* New Power transformers factory is expected to be operational from July’26 likely to cater to upto 220kV and then scaling up to 400kV. The initial focus of the new plant will be on private sector customers including data centers, EPC players and industrial clients rather than participating in utility tenders
* The total order book stood at ~INR15.1bn as of Apr’26 comprising ~INR12.1bn (9,686 MVA) order backlog as on Mar’26 and INR3.1bn (~2,107 MVA). Out of INR~15.1bn order book, ~Rs7.5bn pertains to legacy orders booked prior to 20th Feb, 2026 before the sharp increase in T-oil price and currency led raw material inflation as these fixed price order likely to face margin pressure. All the order book after price escalation are fully update price with additional safety buffers there by reducing profitability risk on fresh orders
* For Voltamp data center segment is emerging as a meaningful growth driver with increase traction from hyperscaler projects. Voltamp has already secured orders for dry-type transformers for an Adani hyperscaler data-centre project in Mumbai.
* On supply-chain challenges there are severe bottlenecks in bushings and other transformer components, while CRGO availability remains stable. CTC continues to face elongated lead times, though procurement planning remains proactive.
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