Transformers & Rectifiers Vs Shilchar
These?2 Small Caps?are on the verge of transforming?into?Mid-Caps. Can they?evolve?into Large Caps?by the end of this upcycle?
??TRIL and?Shilchar?are?Transformer makers?that are?suddenly?experiencing?unprecedented?growth driven by the largest global?CAPEX
??Read?this article to understand the details of this?“once-in-a-lifetime” opportunity!
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??We're witnessing an unprecedented shift in the world's?Energy Landscape
???The global economy is?going through?a monumental?overhaul to ditch?the old, dirty,?“Thermal”?power systems for clean, green,?“Renewable” alternatives
??This isn't just a change; it's a revolution
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??At the core of this transformation??–?Transformers!!!
??They?are the vital link, taking raw power from our?electricity?grids?and turning it into?a usable form?that powers our homes and industries?
??They're not just components; they're the enablers of our?energy?security
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??Picture this: India's power sector isn't just changing - it's exploding
??We're talking?about?a full-blown energy revolution?in which?the country's need for power?will be?off the charts
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??Triggers For Growth?of Power
??Target set?for 500 GW of?Renewable?Energy capacity by 2030
??Govt’s. ambitious goal to grow the power-hungry manufacturing sector to 25% of GDP from a current 17%
??Govt’s. focus on Infrastructure, Railways, Semiconductors, Shipbuilding, and other heavy industrial segments?
??Datacentres and Artificial Intelligence
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??Alright, let's get?into the details!
??Transformers & Rectifiers
??Co. manufactures a wide range of?Transformers, including:
[1]?Power Transformers:?Most commonly used in large installations.?These cater to high-voltage applications,?and are available in various specifications including 220 kV, 400 kV, 765 kV, and 1200 kV
[2]?Furnace Transformers:?A must for industrial heating.?Specifically designed for industrial furnaces
[3]?Rectifier Transformers: Used in applications requiring DC power. They convert AC to DC current
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??Shilchar?Technologies?
??Co. has established itself as a leader in?manufacturing of?specialized?Transformers which are more niche
Types of transformers they manufacture:
[1]?Distribution Transformers: These range from 5 KVA to 3,000 KVA
[2]?Power Transformers: These range from 3,000 KVA to 50,000 KVA
[3]?Electronics & Telecom Transformers: Tailored for specific industry needs?
[4]?Ferrite Transformers: Recently added to product portfolio?to address?emerging market needs
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??Key?Points
???Transformers & Rectifiers
??Ester Fluid-Filled Transformers: TRIL has?manufactured?the world's first 420 kV?Ester?Fluid-Filled?Shunt?Reactor, showcasing innovation in environmentally friendly?Transformer technology
??High-Voltage Specialization:?Focus?on manufacturing?HV?transformers up to 1,200 kV?which have a very high entry barrier. The Vetting process by clients takes very long?(clients remain sticky)?
???Industry Benchmark:?Most preferred Indian brand for manufacture of HV Transformers with the highest quality. 16,000+ installations worldwide with a presence in 25+ countries
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??Shilchar?Technologies
??Focus on Exports: Strategically positioned itself by focusing on exports, which constitutes?50% of revenue
??This export-oriented approach allows the company to maintain higher profit margins and reduce dependency on the domestic market
??Renewable Energy Sector:?Co.?supplies a significant portion of its?Transformers to?the Renewable?Energy sector, which is expected to see substantial growth
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??Orderbook?&?Capacity Expansion
??Transformers & Rectifiers Co.
???Order Book: TRIL's unexecuted order book stands?at?roughly??2,582?Cras of the latest updates?(up from ?900 Cr reported last year)
??Co.?successfully raised ?120?Cr?via?Preferential issue in October 2023
??They also did a QIP round of ?500?Cr?to be completed by the end of the first quarter
??Co. planning to?expand capacity?with these funds
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??Shilchar?Technologies
??Order book as of 2024 is ?355 crores?(as of 31st?Dec?2023)?with good demand?expected?from the Renewables sector?going ahead
??Ongoing?capacity expansion from 4,000M?MVA to 7,500?MVA using internal funds?of ?30 Cr expected to be complete?soon
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??Tailwinds & Headwinds
??Transformers & Rectifiers
?1.?Tailwinds
??Recognized for?scale, variety, and size. 2nd?largest Transformer manufacturing Co. in India based on capacity?
??Massive opportunity?in Renewables,?Railways, and High-Speed Trainsectors
??Highest ever order inflow of ?2,050 Cr during the year.?Total inquiries of ?17,000+?Cr?under negotiation at various stages
??Looking to increase exports share from current 11% to 15% in near term,and 20%?-?25% by FY27
??Focussing on backward integration for operational efficiency. Continuous improvement in financial and operating metrics (such as working capital days)?
2.?Headwinds
???Historically it has struggled with working capital management
??Facing challenges in increasing capacity
??Valuations are stretched
??Margins on the lower side, needs to improve operational efficiency
??Decrease in revenue of 7.52% in FY24 compared with FY23
??Shilchar?Technologies
1.?Tailwinds
??Excellent working capital management,?execution,?and best in class margins?
??50% of orders are from exports (better realisations)
??Recent credit rating upgrade. Debt free Balance Sheet?
??Reasonable valuations compared to other Transformer Co’s.
??Co.?has carved out a niche by focusing on?Transformers for?Renewable?Energy sector, particularly?Solar and?Wind energy, giving it a competitive edge over more generic players?
2.?Headwinds?
??Delay in capacity expansion?
???Poor investor relations. Not much information is available
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??Results
???Transformers & Rectifiers
?Q4?FY24?Results (YoY)
??Revenue: ?438?Cr?????513?Cr (Up 17%)
??Operating Margins:?7%????14%
??Profit: ?10?Cr?????42?Cr (Up?320%)
??FY24 Full Year Results
??Revenue: ?1,396?Cr?????1,291?Cr (Down?7.52%)
??Operating Margins:?9%????10%
??Profit: ?42?Cr?????47?Cr (Up 12%)
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??Shilchar?Technologies
?Q4?FY24?Results (YoY)
??Revenue: ?95?Cr?????105?Cr (Up?10.5%)
??Operating Margins:?22%????30%
??Profit: ?16?Cr?????25?Cr (Up 56%)
??FY24 Full Year Results
??Revenue: ?280?Cr?????397?Cr (Up?42%)
??Operating Margins:?19%????29%
??Profit: ?43?Cr?????92 Cr (Up?114%)
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??Verdict
??In my opinion,?Shilchar?is a better?pick for investors
??Reasonable Valuations
??Debt Free Balance Sheet
??Superior Margins, Better Execution, Better Operating Metrics?
??Focus is on niche products for specific industries giving it a?competitive edge over more generic players
??Massive Capacity Expansion
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? Sovrenn ?is where I got most of my research material for this thread. It is the best resource (website + app) for finding information about potential?multi-bagger?stocks in the SME, Small Cap, and Micro?Cap category?
Hiring-India and Middle East I Oracle Fusion/EBS | RMS I Oracle WMS | Database/Data Architect I Executive Director I Collection Manager I MEAN/MERN | Backend I Frontend I Fullstack I Architects | PMs I EMs I Leads
4 个月Thanks Ali...and its really helpful. Kindly cover GPT Infraprojects and Titan intech
Software Engineer 2 at Uber | Ex-American Express | Internship (American Express, GOJEK, Chargebee)
4 个月Indotech Transformer is also interesting.
Loved it sir!
Co-Founder and COO, Sovrenn.com | Credit Suisse | Deutsche Bank | IIM Calcutta | IIT Kharagpur
4 个月Great work, Ali ??????
CEO, Sovrenn.com | Ex- Vice President, Lenskart | Ex-Project Leader BCG | IIT Delhi Silver Medallist | IIM Calcutta Alumni
4 个月Exceptional article, Ali. This is very well written