Transformers stocks in India are primarily represented by companies engaged in the manufacturing of power transformers, which are crucial for electricity transmission and distribution.
The transformer market is estimated to develop at a CAGR of 4.7 percent between 2024 and 2030, reaching USD 57.8 billion.
One of the primary drivers of the power transformer market is the global increase in power demand. The rising global energy consumption caused by urbanization, industrialization, and population growth is a primary driver of the power transformer market.
Listed below is one such transformer stock with strong management guidance:
Megatherm Induction Ltd
With a market capitalization of Rs. 671 crores, the shares of the company specialized in the manufacturing of various induction heating and melting products, including transformers started Friday’s trading session on a higher note at Rs. 373 compared to its previous close of Rs. 356.15. Within a few minutes of the opening bell, the shares locked a 5 percent upper circuit at Rs. 373.95 apiece.
Looking at the company’s financial performance, the revenue increased by around 8 percent from Rs. 147 crores in H1FY24 to Rs. 159 crores in H2FY24. In addition, the net profits zoomed by around 63 percent from Rs. 8 crores to Rs. 13 crores during the same period.
Comparing the same metrics on a YoY basis, the revenue jumped by around 18 percent from Rs. 135 crores in H1FY23 to Rs. 159 crores during H1FY24. On the other hand, the net profits magnified by 117 percent from Rs. 6 crores to Rs. 13 crores during the same timeframe.
The current order book of the company stands at Rs. 393 crores and has secured orders worth approx. Rs. 102 crores between April and July 2024. Additionally, inquiries from a domestic client, worth Rs. 26 crores, and an export client, valued at Rs. 64 crores, are approaching finalization.
The company is undertaking capital expenditure for the construction of a new shed, expected to be completed by September 2024 and operational by Q4 FY25, intending to generate approximately Rs. 200 crores in incremental revenue by FY26/FY27.
Additionally, they have planned Greenfield expansions, aimed at achieving revenue of 3x to 4x of FY24 figures in 5 years.
Megatherm Induction also plans to boost its domestic and global presence by expanding export operations and participating in international marketing events.
Furthermore, the company plans to launch new products with expanded specifications and services that meet global standards. They also aim to enhance their transformer manufacturing capacity to include industrial and renewable transformers, alongside their existing induction converter transformers.
Moreover, the company aims to enhance operational efficiencies and margins through continuous investment in backward integration and diverse sourcing strategies, aiming for an EBITDA margin of approximately 15 percent by FY27 and 20 percent by FY30.
Megatherm Induction manufactures upstream and downstream equipment and machinery for steelworks, such as transformers, ladle refining furnaces, continuous casting machines, fume extraction systems, etc., as well as electric arc furnaces for the alloy and special steel industry.
The company also offers turnkey solutions for steel plants, which include the planning, engineering, delivery, assembly, and commissioning of steel plants with its own or outsourced systems and machines, as well as customer service with maintenance contracts and spare parts business.
Megatherm Induction manufactures Converter Transformers for use in induction melting and heating equipment, AC-DC drives, and industrial rectifiers.
Additionally, it produces Electric Arc and Ladle Refining Furnace Transformers, Distribution Transformers, Power Transformers, and other types of transformers primarily for industrial applications.
The company serves a diverse clientele, including steel producers, foundries, auto ancillaries, ordnance factories, railways, pipe and tube producers, and engineering industries.
Notable clients include BHEL, Indian Railways, Tata Motors, Mahindra, CESC, Hindalco, Sundaram Fasteners, MM Forging, and Talbros Axles, among others.
In terms of key financial metrics, the company reported a Return on Equity (RoE) of 17.22 percent and a return on capital employed (RoCE) of 25.75 percent for the period spanning FY23-24. Additionally, during the same period, the net profit margin stood at 6.76 percent.
Written By Vaibhav Patil
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