VISIT

NOTE
VOLTAMP TRANSFORMERS LTD.
S E C U R I T I E S P V T. L T D.

Date: 3rd June 2009 CMP Rs: 865

Voltamp Transformers Ltd., established in 1963 is one of the leading players of

Key Share Data customized transformers for industrial, building & power segment with ~20% market
share in Industrial application transformers. The Company after acquiring vast experience
BSE Code 532757 and significant industry expertise in the low-end space is now expanding its presence by
NSE Code VOLTAMP entering in higher league of 220 kV transformer segment. This would not only open new
Bloomberg VAMP IN avenues for the company but would also fetch higher realizations to the company in the
Reuters VOTL.BO future.
Industry Transformers
Sensex 14913 Product Portfolio
Nifty 4424 Power Transformers 5000 KVA, 33kV to 100,000 KVA, 220 kV
Equity (Rs.Cr) 10.1
Distribution Transformers 315 KVA, 11kV to 5000 KVA, 33kV
F.V (Rs.) 10
M.Cap (Rs. Cr) 895 Dry Transformers 63 KVA, 11kV to 7500 KVA, 33kV
52 Wk H/L 960/265
Avg Daily Volume 11,573 KEY TAKEAWAYS
Niche player in Dry-type transformer space:
Absolute Returns (%)
Voltamp is also the niche player in the Dry-type transformer space with ~40% market
1m 3m 12m share in the domestic market. The company has entered into technical collaboration with
Absolute 14 154 12 M/s Mora Transformatoren GmbH, Germany & with M/s HTT, Hann Munden, Germany
Rel. to Sensex 16 106 5 in order to design & manufacture these Dry-type transformers. It manufactures two types
of Dry-type transformers i.e. 1. Vacuum Resin Impregnated Transformers & 2. Cast Resin
Shareholding Pattern (%): (31st Mar 09) Transformers. Dry-type transformers offers environmental (no fire hazards) as well as
economical advantages over oil-filled transformers & hence the government through its
Promoters 51.7
stringent norms has started giving more emphasis to the use of Dry-type transformers in
FII & Institutions 25.9
the public places like air ports, hotels, hospitals, malls, high-rise buildings etc.
Public & Others 22.3

Relative Price Movement Dry - Type Transformer Capacity

2500
140
120 2000
100
(MVA)

Sensex 1500
80
60
1000
40
20 Voltamp 500
0
Jul-08

Aug-08

Sep-08

Oct-08

Nov-08

Dec-08

Jan-09

Feb-09

Mar-09

Apr-09

May-09

Jul09

Jul-09

0
FY05 FY06 FY07 FY08 FY10E
Source: Company, AASPL Research

With ~40% market share in the Dry-type transformers space & with its increasing
importance in future, the company has planned to double its Dry-type transformer
capacity from 1000 MVA in 2008 to 2000 MVA by FY10. Also Dry-type transformers fetch
Head of Research: Kartik Mehta higher realization & margins compared to other transformers, which would enable the
[email protected] company to boost its revenue in the future.
Research Analyst: Shreyas Bhukhanwala
[email protected]

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Research Desk VOLTAMP TRANSFORMERS LTD.

Capacity expansion on back of continuously increasing demand:

Increasing government thrust to augment capacities during the 11th & 12th plan has led to increasing demand for transformers which
in turn has led to huge opportunities in the transformer space. In order to tap this huge opportunities, the company has planned to
expand its capacity from the current 9000 MVA to 13000 MVA which would be operational from H2FY10. The company has
planned a total capex of ~ Rs.35 Crs for this expansion plan, of which ~Rs.25 has already been incurred by the company till FY09.
It's clearly visible from the below diagram that, the company has almost doubled its capacity in 3 years from 7200 MVA in FY07 to
~13000 MVA in FY10E.

Capacity Expansion
14000

12000
R
10000 CAG
30%
8000
(MVA)

6000

4000

2000

0
FY05 FY06 FY07 FY08 FY10E
Power Distribution Dry - Type

Source: Company, AASPL Research

Decent Order-book position:

Voltamp has a decent order-book position of ~Rs.480 Crs as on March'09, representing utilization capacity of ~8800 MVA which is
executable over a period of 6-9 months. Power projects constitutes major portion of the total order-book position.

Order - book Position

500 1

400
0.8

300
(Rs.in Crs.)

0.6
(x)

200

0.4
100

0 0.2
FY04 FY05 FY06 FY07 FY08 FY09

Order-book Position OB / Sales

Source: Company, AASPL Research

As seen from the above chart, the order-book position of the company has tremendously improved over a period of time from
merely Rs. 58.6 Crs in FY05 to Rs. 480 Crs in FY09.

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Research Desk VOLTAMP TRANSFORMERS LTD.

Clientele base 'Well-diversified':

The Company has a well-diversified clientele base, catering to segments like Petrochemicals, Metal, Power, Cement, Real-Estate etc.
which mitigates the risk of client concentration. Over a period of time, the company has developed strong relationships with its
clients like Bhel, ABB, Reliance, L&T, Siemens, Reliance Energy etc. The below diagram shows the Industry-wise revenue break-up for
FY09.

Industry-wise Revenue Break-up (FY09) Top-10 Client Concentration

17% 15%
4% 50 47
11%
5%
40 38 39
32
5% 30
30

(%)
10%
7%
8% 9% 9%
20
Petrochemicals Metal
Power Cement 10
Real Estate SEB's
Infrastructure Pvt Utilities 0
Engineering & Electricals FY05 FY06 FY07 FY08 FY09
Auto & Auto Ancilliaries
Others
Source: Company, AASPL Research Source: Company, AASPL Research

Lower Client concentration:

With increasing diversification, the company has successfully lowered its top 10 client concentration from almost 47% in FY05 to
39% in FY09. Going ahead, the company further expects to reduce this dependence to below 30%.

Margins to decline on back of increasing SEB share:

The company derives major part of its revenue from the private space with only 8% exposure to state electricity boards. Margins are
normally higher in the private space compared to SEB's. Slowdown in the private space as a result of overall slowdown in the
economy has resulted into some concerns for the company in the near future. However in order to overcome this, the company has
started approaching various SEB's & it expects its contribution from SEB's to increase from current ~8% to ~14-15% in 1-2 years
which in turn could negatively impact the margins of the company.

Strong Balance-sheet along with Healthy Return Ratios:

Even in the current deteriorating economic scenario, the company has a strong balance sheet with zero debt & huge cash reserves of
~ Rs.140 Crs (~Rs.140 per share) as on March'09. Also the company historically has delivered very good return ratios with
RoE exceeding over 45% since last 3 years.

Valuations:
At the CMP of Rs.865, the stock is quoting at 7.2x & 6.4x its FY10E & FY11E EPS of Rs.119.6 & Rs.134 respectively. Increasing
spending in the power space, aggressive capex plans coupled with its leadership position in the Dry-type transformer segment would
provide huge opportunities for the company in the future. Also company's strong balance sheet & healthy return ratios provides an
edge over its competitors. However we do not have any rating on the stock.

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Research Desk VOLTAMP TRANSFORMERS LTD.

FINANCIALS
INCOME STATEMENT (Rs. Crs.) FY08 FY09 FY10E FY11E

Revenues 555.3 643.1 750.0 886.0

Raw Material Cost 391.4 444.2 536.5 651.0

Manufacturing & Other Expenses 29.3 31.2 26.0 31.0

Total Expenditure 437.5 493.2 594.0 718.9

Operating Profit 117.9 149.9 156.1 167.1

EBIDTA (%) 21.2% 23.3% 20.8% 18.9%

Dep. & Amortisations 3.1 4.5 5.3 6.5

EBIT 114.8 145.4 150.8 160.6

EBIT(%) 20.7% 22.6% 20.1% 18.1%

Interest 0.5 0.5 0.2 0.0

EBT 114.3 145.0 150.6 160.6

Other Income 10.8 24.0 30.0 40.0

Extraordinary Items 0.0 0.0 0.0 0.0

PBT 125.0 168.9 180.6 200.6

PBT(%) 22.5% 26.3% 24.1% 22.6%

Tax 45.1 54.1 59.6 65.0

PAT 79.9 114.8 121.0 135.6

PAT(%) 14.4% 17.9% 16.1% 15.3%

Minority Interest 0.00 0.00 0.00 0.00

APAT 79.9 114.8 121.0 135.6

APAT (%) 14.4% 17.9% 16.1% 15.3%

Valuation Ratios FY08 FY09 FY10E FY11E

EBITDA (%) 21.2 23.3 20.8 18.9

PBT (%) 22.5 26.3 24.1 22.6

PAT (%) 14.4 17.9 16.1 15.3

EPS (Rs.) 79.1 113.6 119.7 134.1

CEPS (Rs.) 82.9 118.0 124.9 140.6

P/E (x) 10.9 7.6 7.2 6.4

P/CEPS 10.4 7.3 6.9 6.2

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Research Desk VOLTAMP TRANSFORMERS LTD.

S E C U R I T I E S P V T. L T D.

Corporate Office :
3rd Floor Janmabhoomi Bhavan, Janmabhoomi Marg, Fort, Mumbai 400 001.
Tel.: (022) 66518020, Fax: (022) 22824242, Email: [email protected]

AASPL Investment Ranking

BUY: Expected to outperform the local market by more than 10%
OUTPERFORM: Expected to outperform the local market by 0-10%
NEUTRAL: In-line with the local market
UNDERPERFORM: Expected to underperform the local market by 0-10%
SELL: Expected to underperform the local market by more than 10%

This document is for information only and is meant for the use of the recipient & not for circulation. The information contained in this document has been taken from publicly available information, trade and
statistical services & other sources. While the information contained herein is from sources believed to be reliable, we do not hold ourselves responsible for its completeness and accuracy. All opinions and
estimates included in this report constitute our judgement as of this date and are subject to change without notice. Investors are expected to use the information contained in this report at their own risk. This
report is not and should not be construed as an offer or the solicitation of an offer to buy or sell any securities. M/s Asset Alliance Securities Pvt. Ltd. and it's affiliates may act as market maker or have assumed
an underwriting position in the securities of companies discussed herein and may sell them to or buy them from customers on a principal basis.

Disclosure of Interest Statement VOLTAMP TRANSFORMERS LTD.

1. Analyst ownership of the stock Yes
2. Group/Directors ownership of the stock Yes
3. Broking relationship with Company covered No