Voltamp Transformers Ltd - Rs 350.00
Established in 1963, Voltamp Transformers Limited (VTL) is a leading manufacturer of customized transformers for industrial, building and power applications. It has special expertise in production of dry type vacuum resin impregnated (upto 3 MVA/11 kV class) and cast resin transformers (upto 7.5 MVA/33 kV class) apart from manufacturing regular oil filled power & distribution transformers, induction furnace transformers & unitized substations. Infact, company is the market leader in dry type transformers with around 40% market share. Unlike other transformer makers, VTL's focus is on the non-SEB industrial and engineering segment, which has enabled the company to preserve profitability on a consistent basis. Company caters to a wide spectrum of transformer users in various industries like petrochemical, oil refining, cement, paper and pulp, pharmaceuticals, automobiles, steel, power plant, building, metro rail applications, mining and minerals and many others. Its client base includes the leading business houses, well known PSUs and large cooperatives such as Reliance Industries, Jindal Steel, Bharatforge, Hindalco, Guj Alkalies, Kirsloskar group, JK Cement, Siemens, ABB, L&T, Torrent Power, Suzlon etc to name a few. Notably, company derives nearly 40% of total revenue from distribution transformer, 35% from power transformer & balance 25% from dry type transformer.
As of today, VTL has three manufacturing units, each for power, distribution & dry type transformer at Makarpura, Vadodara with a combined production capacity of 9000 MVA per annum on a three shift basis. Surprisingly, VTL has consciously taken low exposure to state electricity board which constitutes nearly 5% of total sales. As per the management, SEB market for transformers has large volumes but is characterized by stiff price competition and also the credit period is high resulting in huge receivables position thus bloating the working capital. However in case of downturn, company always has the option to increase its supply to SEB. But currently with nominal revenue contribution from the SEBs, VTL’s exposure to receivable risk, due to financial ill health of SEBs, is low. On the other hand, company has focused on the dry type transformer segment aggressively as it is a highly lucrative business offering higher margins than oil filled transformers and only few players manufacture them. Also the technology used is not easily available. Accordingly, VTL has license agreements with two German companies for manufacture of vacuum resin impregnated dry type transformers and cast resin dry type transformers.
To meet the rising demand of transformers, VTL is in the midst of Greenfield expansion and is putting up manufacturing facility at Vadadla, Vadodara with an investment of about Rs.35 cr. The plant, expected to become operational by April 2009 will enhance the capacity by more than 50%, thereby taking the total transformer manufacturing capacity to 13000 MVA from 9000 MVA. Post expansion the capacity across business segments will stand as distribution transformers – 5000MVA, power transformers – 6000MVA and dry type transformers – 2000MVA. With govt aggressively pressing for accelerated development of power generation, transmission and distribution capacities, transformer industry is expected to continue a CAGR above 15%, for the next five years period. In view of this, VTL, being one of the oldest and established players in the transformer sector, is expected to benefit. Secondly with the increasing demand of dry type transformers, their contribution in the overall sales is bound to increase which in turn will give a boost to the operating margins of the company. Thirdly the recent fall in copper price will also positively impact the bottomline going forward. Meanwhile, VTL’s has satisfactory order book position of around Rs 400 cr.
Recently, VTL came out with encouraging set of nos for the Sept qtr. Sales grew by 15% to Rs 170 cr but PAT jumped up 50% to Rs 27 cr on back of better operating margin which stood at 22% against 19% last year. Accordingly for six months ending Sept’08, it recorded 25% & 40% growth in sales and NP to Rs 340 cr and 50.50 cr respectively. Hence it has already posted an EPS of Rs 50 for H1FY09. So for the entire FY09 it may clock a turnover of Rs 650 cr and profit of Rs 85 cr i.e. EPS of Rs 84 on equity of Rs 10.10 cr. It may even declare a dividend of Rs 15 for FY09 which gives a yield of more than 4% at CMP. Fundamentally also company is quite strong being debt free and having huge reserves of more than 150 cr, liquid cash worth Rs 60 cr, ROCE of 95% and ROE of 60%. Considering the 52w high of Rs 1940, scrip has been battered down mercilessly to 20%, thereby giving a good opportunity for long term investor to accumulate for a price target of Rs 675 in 12~15 months.
No comments:
Post a Comment