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Voltamp Transformers: Unfazed by a slowdown - Views on News from Equitymaster
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Voltamp Transformers: Unfazed by a slowdown
May 18, 2009

Performance summary
  • Sales grow 16% YoY in FY09, 23% YoY in 4QFY09.
  • Operating margins improve from 21.2% in FY08 to 23.3% in FY09. Lower raw material, other expenditure and staff costs (all as percentage of sales) aid this expansion.
  • Higher operating margins along with a surge in other income lead to a 43% YoY growth in net profits.
  • Board recommends dividend of Rs 12.5 per share (dividend yield of 2.4%).


Financial performance snapshot
(Rs m) 4QFY08 4QFY09 Change FY08 FY09 Change
Sales 1,351 1,666 23.2% 5,553 6,431 15.8%
Expenditure 1,017 1,304 28.2% 4,375 4,932 12.7%
Operating profit (EBDITA) 334 362 8.2% 1,179 1,499 27.1%
Operating profit margin (%) 24.7% 21.7% 21.2% 23.3%
Other income 30 94 211.8% 108 240 122.8%
Interest 0 2 5 5 -7.3%
Depreciation 10 13 30.9% 31 45 42.5%
Profit before tax 355 441 24.3% 1,250 1,689 35.1%
Tax 138 139 0.5% 451 541 20.0%
Profit after tax/(loss) 216 302 39.6% 799 1,148 43.7%
Net profit margin (%) 16.0% 18.1% 14.4% 17.9%
No. of shares 10.1
Diluted earnings per share (Rs) 79.0 113.5
P/E ratio (x) 4.7

Company Background
Voltamp Transformers, based in Gujarat, operates in a single business segment, that of electrical transformers. The company has the capabilities to manufacture 4 types of transformers i.e., oil filled power transformer, oil filled distribution transformer, resin impregnated dry type transformer and cast resin type transformers, and has independent units for each. Its total installed capacity is around 5,000 MVA per annum. Its customers include various government and semi-government projects, various industries like refineries, fertilizer plants and state electricity boards (SEBs). Turnkey contractors like ABB, Siemens, and L&T source some of their transformer requirements for their switchyard package orders from Voltamp. Apart from India, its installations are also in countries like Nepal, Bhutan, Indonesia, Sri Lanka and Middle East.

What has driven performance in FY08?
  • Voltamp recorded a decent 16% YoY increase in sales during FY09, and a 23% YoY increase during the quarter (4QFY09). The company also turned in quite a good performance in terms of operating margins. Infact, all its cost heads, namely raw materials, employee costs and other expenditure, saw a decline (as percentage of sales) during FY09. This led to an expansion in the companyís operating margins which improved from 21.2% in FY08 to 23.3% in FY09.

  • The expansion in operating margins, a surge of 123% YoY in the Voltampís other income and a lower effective tax rate all contributed to a robust 44% YoY increase in the companyís bottomline.

What to expect?
At the current price of Rs 530, the stock is trading at a multiple of 4.7 times its trailing twelve month earnings. Given the slowdown seen by transformer companies across the board, the performance shown by Voltamp has been enthusing.

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