Strong player in distribution space; retain with lower TP
We maintain BUY on Voltamp Transformers (VAMP) while cutting our TP by ~15% to Rs11,350 (upside: 39%) from Rs13,350 earlier. VAMP’s Q4FY25 results were ahead of estimates due to higher than estimated volume and realization. The higher volume (+9.4% YoY) included a spillover from last year. Revenue/EBITDA/PAT was up 24/16/4% YoY at Rs6.2bn/1.2bn/968mn. EBITDA margin declined by 135bps YoY to 18.6% as gross margin fell by 300bps/230bps YoY/QoQ to 27%. PAT growth was impacted by lower other income and higher tax rate. The management indicated a healthy and sustaining enquiry pipeline across end-markets, especially renewable projects, aided by steady growth in domestic demand. The announced capacity addition plan of 6,000MVA is on track. The BoD declared dividend of Rs100/share. We believe VAMP would be a key beneficiary of India’s renewable capacity addition, private capex revival, and GoI’s PLI initiatives in the manufacturing space. VAMP’s current strong order-book (Rs9.8bn, +26% YoY), coupled with the enquiry base, robust balance sheet, and improved cyclical demand tailwinds, grants us a more constructive outlook on the stock.
Q4FY25 results ahead of estimates
Q4FY25 performance was ahead of estimates led by higher-than-expected volume and realization. Revenue/EBITDA/PAT was up 24/16/4% YoY at Rs6.2bn/1.2bn/968mn. EBITDA margin declined by 135bps YoY to 18.6% as gross margin fell by 300bps/230bps YoY/QoQ to 27%. PAT was impacted by the lower other income (-27% YoY due to MTM losses) and higher tax rate at 25% as against 21.7% in Q4FY24 (FY25: 25%).
Volume growth and realization spring a surprise
Volume during Q4FY25 stood at 4,490MVA (+9.4%YoY), ahead of our estimates; this is likely due to a spillover from last year. Implied utilization stood at 128% (FY25: 110%). We expect normalization from next year. For FY25, volume increased 18% YoY at 15,460MVA. Q4 implied realization per MVA came in at a new high, of Rs1.3mn (+14% YoY). This could be on the back of the favorable mix. For FY25, realization stood at Rs1.2mn per MVA, +2% YoY.
We maintain BUY; revise down TP
We cut FY26/27E earnings by ~3% each, mainly on account of reduction in margin by ~30/50bps and lower other income, while we raise realization by 3%. We introduce FY28 estimates with revenue/EBITDA/PAT growth of 9%/10%/11%. The stock is currently trading at ~27x/22x/20x its FY26E/FY27E/28E 1YF PER. We maintain BUY, while revising down our TP by ~15% to Rs11,350 @30x 1YF FY27E earnings. Sustained positive momentum at the sectoral level provides a strong case for us remaining positive on VAMP maintaining its robust balance sheet, customer stickiness, and upcoming capacity expansion.
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