₹ 1152 to ₹ 2755: Small cap stock delivers multibagger returns; Brokerage sees 30%

The shares of Voltamp Transformers Ltd zoomed 139.18% in the past two years to give multibagger returns, as its share price increased from ₹ 1,152.05 to ₹ 2,755.50 apiece. If an investor would have invested ₹ 1 lakh in the company’s shares two years ago, the value of their holdings would have been ₹ 2.39 lakhs today! 

Voltamp Transformers is a Baroda-based company that manufactures various types of Oil filled Power & Distribution Transformers of various classes. 

ICICI Securities recently initiated coverage on the stock and it has given a buy rating with a target price of ₹ 3,610, indicating an upside of 31% as compared to its current share price of ₹ 2755.50 apiece. 

The brokerage believes that the company is a key player in the transformer manufacturing space in India, with a domestic market share of 15% (as per the company’s management). Voltamp Transformers caters to diversified sectors and 85% of its revenue comes from private-sector customers. Voltamp has developed strong relationships with clients over the years, which have helped it to have a large installed base of more than 60,000 transformers (as of March 2022) in the domestic and foreign markets. 

ICICI Securities also believes that the company stands to be a key beneficiary of the energy transition, private capex revival and the PLI initiatives of the government in the manufacturing space. 

The brokerage highlighted that Voltamp Transformers’ current order book at ₹ 9 billion and strong balance sheet and improved outlook on profitability would likely keep earnings growth strong in the next three years. It added that a pick-up in power distribution capex and investments in the manufacturing sector could lead to growth in Voltamp’s order book. 

Voltamp Transformers is a small-cap company with a market capitalization of ₹ 2,747 crores. It has a return on equity of 14.96% and a dividend yield of 1.29%. The company has a price-to-earnings ratio of 15.68, which is significantly lower than the industry average of 37.17, indicating that the stock might be undervalued as compared to its peers.The company has also consistently enjoyed a debt-free status, indicating its strong focus on better working capital management. 

Written by Simran Bafna 

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