Investors in Transformers & Rectifiers India have witnessed an exceptional journey, with the stock surging by a staggering 4633% from ₹6.95 per share in April 2020 to ₹330 per share presently.
Remarkably, each passing year has brought consistent returns, with the stock delivering over 50% returns annually since CY20. CY23 marked a pinnacle with a remarkable yearly gain of 314%. Even in CY24, the stock has already risen by 43%, showcasing its unwavering momentum. Notably, on January 25, it reached a new all-time high of ₹397.30 per share.
Looking ahead, the bullish trajectory of Transformers & Rectifiers India is expected to persist, with projections from brokerage firm Nuvama Institutional Equities suggesting the stock could surpass the ₹550 mark, further accentuating its status as a prime investment opportunity.
In its latest analysis, Nuvama Institutional Equities has taken a bullish stance on Transformers & Rectifiers India, initiating coverage on the stock with a ‘buy’ rating. The brokerage has set an ambitious target price of ₹575 per share, reflecting an impressive upside of 74% from the stock’s latest closing price. This optimistic outlook underscores the firm’s confidence in the company’s growth prospects and reinforces its status as a compelling investment opportunity in the market.
“Rising Demand for Transformers Drives Bullish Outlook for Transformers & Rectifiers India”
The brokerage’s bullish stance on Transformers & Rectifiers India is underpinned by the surging demand for transformers, fueled by the expansion of renewable and thermal power capacity to address India’s escalating energy needs.
According to Nuvama, the escalating demand for power generation and transmission is propelled by India’s ambitious targets for urbanization, electrification, and digital automation. As the country aims to elevate its manufacturing base to 25% of GDP by FY25/26E and embraces initiatives in areas like railways, industrial corridors, mining, and green hydrogen, the need for robust power infrastructure becomes increasingly imperative.
Against this backdrop, Transformers & Rectifiers India stands poised to capitalize on the growing demand for transformers, positioning the company for sustained growth and profitability in the dynamic energy landscape of India.
Nuvama Institutional Equities underscores the pressing need for aggressive renewable energy (RE) additions of 30–40 GW/year and thermal additions exceeding 10 GW/year in India to avert base power deficits over FY28–30. According to the brokerage, these additions are not merely options but imperative requirements to maintain power equilibrium.
Highlighting the cascading effect of such large-scale RE additions, the brokerage emphasizes the necessity for a corresponding step-up in transmission connectivity, estimated at ₹2.4 trillion according to the Central Electricity Authority (CEA).
Transformers play a pivotal role in the power grid, facilitating connectivity across various power sources. With major economies increasingly transitioning to renewables, which introduce fluctuating voltages to the grid, power grids are becoming more intricate and demanding.
As per Nuvama, this complexity underscores the urgent need for upgrading transmission infrastructure, not only to accommodate grid expansion but also to ensure stability. This entails the replacement and upgrading of older transformers and other essential equipment to meet the evolving demands of the power sector.
Nuvama Institutional Equities highlights the company’s robust positioning, projecting it to outpace the transformer industry’s compound annual growth rate (CAGR) of 24%+ over FY23–27E. This optimistic outlook is underpinned by various factors, including Transformers & Rectifiers India’s substantial order book of ₹25 billion+ (equivalent to 1.9x FY23 sales), ongoing capacity expansion initiatives, and backward integration efforts.
The brokerage foresees favorable macroeconomic conditions driving accelerated order inflow growth, coupled with operating leverage that could potentially elevate the company’s EBITDA margins to 13–15% by FY26E/27E, up from the current range of 8–10% (with a peak of 18–20% in the last cycle). This anticipated margin expansion translates into an impressive earnings per share (EPS) CAGR of 85%+ over FY23–27E.
Transformers & Rectifiers India distinguishes itself in the market as the sole Indian company equipped to manufacture all types of transformers, including distribution transformers, high-voltage transformers, special-duty transformers, furnace transformers, reactors, as well as transformers tailored for renewable and green energy applications. This comprehensive product portfolio positions the company as a leading player in the dynamic and evolving energy sector landscape.
Sources: livemint.com
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