Domestic brokerage and research firm ICICI Securities has initiated coverage on the stock of heavy electrical equipment maker Voltamp Transformers, which has delivered multibagger returns to investors over five years.
multibagger The smallcap stock has gained 144.18 per cent in the last five years. However, it is currently down 26 per cent from its 52-week high. 3686, hit on August 4, 2022.
Prudent execution track-record and focus on balance sheet have consistently been key success factors behind Voltamp’s growth story, says brokerage Initiates ‘Buy’ rating and target price 3,610 per share, a 35 per cent upside.
“The company is a dominant player in the transformer manufacturing sector with a domestic market share of 15 per cent (as per the management), catering to diversified sectors (85 per cent revenue comes from private customers),” the note said.
inventory Trades at 11.8 times FY24 and 10 times FY25 EV/EBITDA. The RoIC for FY24/FY25 stands at 34 per cent/36 per cent.
The brokerage believes that the order book will improve with capex revival and higher distribution capex. Higher sales will ensure better profitability on the back of improving installed capacity utilization of the industry.
“We believe that any new capacity addition plan by the company could be a positive trigger going forward,” it said, citing intensified competition, higher raw material prices and slowing industrial capex as key risk areas. be exposed.
ICICI Securities expects the company to be a strong beneficiary of India’s growing power requirements due to increasing urbanisation, improving capacity utilization and thus higher industrial capital expenditure across sectors.
The government’s thrust on infrastructure development is likely to provide a further boost to the growth for last-mile connectivity in the country. The energy transformation initiative of the government will further increase the demand for the company’s products.
The brokerage said that Voltamp’s diverse product portfolio has given it a competitive edge over its peers. The company has consistently enjoyed debt-free status, indicating its strong focus on better working capital management. It has a diverse clientele including private players and select PSUs, with private players accounting for the majority of its revenue.
Cash and cash equivalents were at the end of December 2022 6.4 billion (24% of market cap).
“We project earnings CAGR of 16 per cent over FY22-FY25E. The stock is trading at 11.8 times FY24 EV/EBITDA and 10 times FY25 EV/EBITDA. The company has a healthy ratio of 34%/36% FY24/FY25 ROIC after tax.”
according to a mintjini An average of three analysts in the survey have a ‘Buy’ recommendation on the stock.
disclaimer, The views and recommendations expressed in this article are those of the broking firm. These do not represent the views of Mint.
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