This Power Sector Stock Grew 705.66% In 3 Years, Buy For Strong 35% Upside, Says ICICI Direct

ICICI Direct, a leading brokerage firm, has given a buy call to Transformers and Rectifiers India Limited (TRIL) for a target price of Rs 645 apiece. If you purchase the stock at the current market price it would yield 35% positive returns. TRIL is a small cap Power sector stock having a market capitalisation of Rs 849.07 crore.

Stock Outlook & Performance

The current market price (CMP) of TRIL is Rs 64.05/share, fallen 2.14% from its previous close. The stock touched its 52-week high at Rs 67.40/share on 28 October 2022 and 52-week low at Rs 25.05/share on 20 June 2022, respectively.

In the previous 1 week, it has grown 13.56%, whereas in the past 1 month, it grew 13.87%, respectively. In the last 1 year, the stock has surged 81.44%. It gave a massive 705.66% return in the last 3 years. In the last 5 years, it gave 51.6% positive returns, respectively.

Q2FY23 Performance

For Q2FY23, TRIL posted strong results. Consolidated revenue grew 15.1% YoY to Rs 307.5 crore. EBITDA grew strongly by 60.6% YoY to Rs 34.2 crore with margins of 11.1% vs. 8% in Q2FY22. Consequently, PAT came in at Rs 12.2 crore, up 122.2% YoY.

Buy for a target price of Rs 86/share

After many years of stagnant performance, growth prospects are looking bright across all parameters. Revenue CAGR of 20% in FY22- 24E coupled with margins hitting 10.8% in FY24E will enable TRIL to post its best ever profitability performance. "We initiate coverage under I-Direct Nano format with a BUY rating. We value TRIL at Rs 86 i.e. 15x on FY24E EPS," ICICI Direct said.

Key triggers for future price performance

According to the brokerage the key triggers are:

• Robust outlook coupled with an all-time high order backlog will allow TRIL to post a robust performance, going ahead.
• TRIL is likely to expand its capacity in FY24E for hydrogen powered transformers in its existing manufacturing unit and will tap players that have mega plans in setting up facilities for producing green hydrogen.
• It is aggressively targeting export markets like Middle East, Russia, Africa and the US for enhancing export segment revenues. Export orders generally have the best gross margin profile vis-à-vis domestic orders.
• We build in revenue, EBITDA CAGR of 19.5%, 59%, respectively, in FY22-24E.

About the stock

Transformer and Rectifier India (TRIL) is a leading manufacturer of transformers up to 1200 kV class. TRIL has a wide range of transformers, like power & distribution transformers, furnace transformers, rectifier transformers & special transformers. It has strong in-house design & technical expertise; combined with technical collaboration/JV relationship for 765 kV transformers & reactors.

A diversified customer base in India, coupled with an international presence in over 20 countries. Total 50% revenue comes from utilities (like state electricity boards, PGCIL, Railways), 44% comes from industrials that includes renewables and 6% exports including third party exports - utilities & power.

Disclaimer

The stock has been picked from the brokerage report of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.