About the Company

Incorporated in 2006, Vilas Transcore Limited (VTL) manufactures and supplies power transmission and distribution components, primarily serving transformers and other power equipment manufacturers in India and abroad. The company produces various Cold Rolled Grain-Oriented (CRGO) electrical lamination and other CRGO Cores. It operates from manufacturing facilities located in Por (Vadodara), Gujarat, with a total capacity of 12,000 MTPA (metric tons per annum). Its major customers include companies like Voltamp Transformers, Electrotherm India, Atlas Transformers India, and Shilchar Technologies.

Vilas Transcore Limited raised INR 95.22 Cr. through their IPO in June, which they are strategically deploying to fuel their growth. A significant portion of the proceeds, INR 45.2 Cr., was allocated towards acquiring and installing new plant and machinery to enhance production efficiency. Another INR 20.1 Cr. is earmarked for building construction to expand their operational capacity. The company also plans to invest INR 5 Cr. in strategic acquisitions to drive growth and INR 18.2 Cr. for general corporate purposes, including working capital. Finally, INR 6.72 Cr. was used to cover the expenses related to the IPO process.

Vilas Transcore has a healthy return profile with an ROE of 17.5% and ROCE of 22% (FY24)

FY24 Performance

• Revenue from Operations stood at Rs 309.7 Cr. vs INR 282.6 Cr. in FY23, up 9.6% YoY
• EBITDA stood at INR 34.6 Cr. vs INR 31.5 Cr in FY23, up 9.9% YoY
• EBITDA Margins were stable at ~11.1%
• Net Profit stood at INR 23.1 Cr. vs INR 20.2 Cr. in FY23, up 14.2% YoY
• PAT Margins at 7.3% vs 7.1% in FY23, up ~20bps YoY
• Operating at full capacity with utilization at ~90%

Promoter Analysis

Nilesh Jitubhai Patel - Chairman & Managing Director

• Holds a 73% stake in the company
• 27+ years of experience in manufacturing and processing laminated cores, transformer components, and sheets for the transformer and power industry.
• Holds a Diploma in Electricals (CME)

Sandeep Ambalal Patel - Non-Executive Independent Director

• 35+ years of experience in multiple sectors.
• Holds a Diploma in Electronics from SMIT College

Vipul Kumar Patel - Whole Time Director & CFO

• 16+ years of experience in accounting and finance.
• Holds a Bachelors of Commerce Degree from Gujarat University

Product Insights

Current Product Portfolio:

CRGO (Cold Rolled Grain-Oriented) Transformer Lamination: The core component of transformers, is used to minimize losses caused by hysteresis and eddy currents.

CRGO Stacked Assembled Core/Coil-Core Assembly: Complete CRGO assembled cores used for the insertion of LV and HV coils in transformers.

Wound Core/Toroidal Core: Compact and lightweight solutions compared to traditional stacked cores, used where space and weight are limited.

Yoke shunt/tank shield: Strips of CRGO coils used to reduce losses in large transformers.

CRGO Slit coils: Slitted and cut from CRGO coils, used for manufacturing transformer laminations and cores.

New Product Line:

Radiators: Used in transformers, with slightly higher margins than CRGO laminations.

Core Assembly: Primarily targeted for export, with margins 2-3% higher than CRGO laminations.

Key Drivers and Investment Thesis

Strong Growth Guidance: The management has guided for a high 30-35% sales growth in FY25. A robust growth in the next 5 years, supported by a capacity utilization of over 90% and new product lines.

Tripling Capacity: VTL is investing INR 80-85 Cr. in a greenfield project to expand their capacity by 24,000 MTPA, which will triple their current capacity of 12,000 MTPA to 36,000 MTPA by Q3FY25.

Capturing Market Share: VTL’s market share is set to increase from its existing 4% to 6% in the next 2 years supported by the capacity expansion.

Healthy Debt Profile: Despite a high working capital requirement, the company has a healthy debt profile with negligible long-term borrowings.

Credit Rating Upgrade: VTL’s recent credit rating upgrade to ICRA A- from ICRA BBB+ for long-term borrowings and ICRA A2+ from ICRA A2- for short-term borrowings, which reflects an improved credit profile.

Valuation and Recommendation

We forecast INR 20.9 EPS for FY27. We value Vilas Transcore Limited (VTL) at 35x FY27 EPS at INR 733 per share.

We assign a “Buy” Rating to VTL with an upside of 46% in the next 18-24 months based on a healthy debt profile, high growth prospects, and increasing market share.

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Disclaimer:

Mool Capital Limited is a SEBI Registered Research Analyst having registration no. INH000012449. This report has been prepared by Mool Capital Pvt. Ltd. and is solely for information of the recipient only. The report must not be used as a singular basis of any investment decision. The views herein are of a general nature and do not consider the risk appetite or the particular circumstances of an individual investor; readers are requested to take professional advice before investing. This document is not, and should not, be construed as an offer or solicitation of an offer, to buy or sell any securities or other financial instruments. This report should not be construed as an invitation or solicitation to do business with Mool Capital. Mool Capital and its affiliated company(ies), their directors and employees may; (a) from time to time, have a long or short position in, and buy or sell the securities of the company(ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions.