Transformers and Rectifiers India surges 10% on healthy growth outlook

Shares of Transformer and Rectifier India (TRIL) hit multi-year high of Rs 70.75, as they rallied 10 per cent on the BSE in Wednesday’s intra-day trade amid heavy volumes on healthy growth outlook. The stock is trading at its highest level since 2008. It had hit a record high of Rs 91 on January 1, 2008.

At 10:10 AM; TRIL quoted 9.5 per cent higher at Rs 70.15, as compared to 0.16 per cent rise in the S&P BSE Sensex. The average trading volumes at the counter more-than-doubled with a combined 2.6 million shares, representing 2 per cent of total equity, changing hands on the NSE and BSE.

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.

In past one week, the stock has outperformed the market by surging 25 per cent, as compared to 1.8 per cent decline in the S&P BSE Sensex. In past six months, the market price of the company has more-than-doubled or zoomed 126 per cent, as against 11 per cent rise in the benchmark index.

“The change in the prices of the equity shares of the company was subject to market conditions and the management of the company is in no way connected with any such movement in equity prices,” TRIL on Tuesday said in a clarification to the on significant movement in the price of the company’s security.

Meanwhile, on December 29, 2022, TRIL informed that the company was awarded orders of Transformers for total contract value of Rs 123 crore from one of the Central Utility.

The said orders fall under the normal course of business. The company neither has any interest in these entities that awarded the orders nor fall within related party transactions. With the new order, the company’s order book as on date stood at Rs 1,513 crore, TRIL said.

The company has participated under bidding process of state utilities, central utilities, EPC’s, Private, TBCB tenders etc. for more than Rs 9,000 crore.

There are challenges with uncertainty due to tense situation in Russia – Ukraine Border, China – Taiwan Border, frequent changes in repo rate by RBI, depreciating rupee and increase in petroleum prices.

“However with our continuous focus & efforts on existing customers to get repetitive business, gaining opportunities in new market / segment and improving margins at all level, we are optimistic to achieve a healthy growth in revenue during the year 2022-23,” TRIL said on outlook for 2022-23 (FY23). The company guided profit after tax (PAT) in the range of Rs 45-Rs 50 crore for FY23. Revenue will be between Rs 1,250-Rs 1,300 crore and Ebitda of Rs 100-Rs 110 crore for FY23.

For FY22, TRIL had posted PAT of Rs 14.25 crore on revenue of Rs 1,161 crore, while Ebitda stood at Rs 83.88 crore.
After many years of stagnant performance, growth prospects are looking bright across all parameters. Revenue CAGR of 20 per cent in FY22-24E coupled with margins hitting 10.8 per cent in FY24E will enable TRIL to post its best ever profitability performance, according to ICICI Securities.

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 are key triggers for future price performance, the brokerage firm said.

Technical View

Bias: Positive

Target: Rs 72; Rs 77; Rs 82

Support: Rs 67; Rs 65.25

The stock had given a trendline breakout on Monday at Rs 63.70, and since then has managed to hold above the since despite yesterday's corrective move.

In the near term, the bias for the stock is likely to remain positive as long it holds above Rs 67 level, which is the higher-end of the Bollinger Bands on the daily chart. Further, the monthly chart indicates that the bias for January is likely to remain positive as long as the stock holds above Rs 65.25.

As per the yearly Fibonacci chart, the stock can test Rs 72 on the upside, above which the next two targets are at Rs 77 and Rs 82.

(With inputs from Rex Cano)