Transformer stock trading at a discount of more than 55% to add to your watchlist

A transformer stock is currently trading at a 58 percent discount, making it an interesting opportunity for investors to watch. With its potential for growth, this stock could present a favorable entry point, especially for those looking to capitalize on market shifts and future performance.

Price Movement 

Shares of Voltamp Transformers Limited were trading at Rs.6,135.00 each, representing a 58 percent drop from its 52-week high price of Rs.14,800.00 per share. On Tuesday, the stock reached an intra-day low of Rs.6,137.10, down 4.5 percent from its previous closing price of Rs.6,428.70.

What happened 

The company posted disappointing results for December 2024, ending a streak of 15 consecutive positive quarters. This sudden downturn has rattled investor confidence, triggering a sell-off of the stock. Voltamp has notably underperformed compared to both the broader capital goods sector and the Sensex.

In the past month, the stock has fallen by about 26.54 percent, a stark contrast to the Sensex’s slight dip of just 1.72 percent. This relative underperformance may dampen investor interest, potentially leading to further declines in the stock price.

Product Range and Manufacturing Facilities

Voltamp is a leading manufacturer specializing in a diverse range of transformers, including distribution transformers, power transformers, and dry-type transformers (such as resin-impregnated and cast resin types). 

The company operates a state-of-the-art manufacturing facility located in Makarapura, Vadodara, housing four independent units, each dedicated to the production of different transformer types, ensuring high-quality output across its product portfolio.

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Healthy Order Book 

As of August 3, 2024, Voltamp maintains a robust order book of Rs.1,475 crore, ensuring strong near-term revenue visibility. Analysts anticipate a 5-6 percent year-on-year growth in VTL’s sales for FY25, driven by the healthy order book and sustained demand for transformers, supported by increased capital expenditure across the industry. This solid order pipeline positions the company for steady growth in the coming year.

Market Position

Voltamp Transformers is a prominent supplier of energy-efficient transformers within the corporate sector and private utility segments in India. Its focus on quality has made it a preferred option for clients seeking dependable transformer solutions.

Financial Performance

For the quarter ending December 2024, the company reported revenue from operations of Rs.484 crore, reflecting a 19 percent increase compared to Rs.408 crore in the same quarter of the previous year. Alternatively. Profit After Tax (PAT) fell by 23 percent, reaching Rs.73 crore from Rs.95 crore in the same period.

Ratio Analysis

The Return on Capital Employed (ROCE) of the company stands at 31.88 percent, while the Return on Equity (ROE) is 24.22 percent. 

The company’s Price-to-Earnings (P/E) ratio is 20.19x, below its 3 year median (P/E) of 22.2x and industry average of 74.04. Additionally, the company has a good current ratio of 3.4, debt-to-equity ratio of 0.00 and an Earnings Per Share (EPS) of Rs.318.39.

Company Profile 

Voltamp Transformers Ltd is a leading manufacturer specializing in a range of transformers, including oil-filled power and distribution transformers and dry-type transformers. The company has a strong market presence, supplying its products to a variety of public sector undertakings, multinational corporations, and large cooperatives.

Written by – Siddesh S Raskar

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