Transformers & Rectifiers India: EBITDA growth of 382% & revenue growth of 90% in H1-25 at a PE of 86
FY25 revenue growth of 43% & EBITDA growth of 87-94%. FY24-27 guidance of EBITDA CAGR of 75-85% & Revenue CAGR of 52-57%. Margin expansion 10.5% to 16-17% by FY27. Order book 1.5X FY25 revenue.
1. Why is TARIL interesting?
transformerindia.com | NSE: TARIL
TARIL has provided a strong guidance, projecting an EBITDA CAGR of 75-85% and a Revenue CAGR of 52-57% for FY24-27, on the back of industry tailwinds. Its H1-25 performance indicates it is on track to meet FY25 targets. The company’s focus on capacity expansion, backward integration, and exploration of export markets positions it well to capitalize on these industry tailwinds.
2. Transformer & Reactor manufacturer
3. FY20-24: PAT CAGR of 196% & Revenue CAGR of 17%
4. FY24: PAT up 11% & Revenue down 7%
5. Strong Q2-25: PAT up 2297% & Revenue up 80% YoY
PAT up 121% & Revenue up 43% QoQ
6. Strong H1-25: EBITDA up 382% & Revenue up 90% YoY
7. Business metrics: Return ratios are not exceptional
8. Outlook: Strong Revenue growth & margin expansion supported by order book
i. FY25: Revenue growth of 43%
Revenue of Rs 2,000 cr in FY25 is a 43% growth over FY24
Rs. 2000 crores is quite achievable and we are working on that
ii. FY25: EBITDA growth of 87-94%
EBITDA margin expansion from 10.4% to 12.5-13% in FY25 implies an EBITDA growth of 87-94%
And EBITDA margin will remain somewhere between 12.5% to 13% levels
iii. FY24-27: EBITDA CAGR of 75-85% & Revenue CAGR of 52-57%
Stand alone revenue growing from Rs 1291 cr in FY24 to Rs 4500-5000 cr by FY27 implies a FY24-27 revenue CAGR of 52-57%. EBITDA margin expansion from 10.4% to 16-17% in FY27 implies an FY24-27 EBITDA CAGR of 75-85%
next 3 years we are well posed to reach Rs. 4500 crores to Rs. 5000 crores numbers on a standalone basis with the EBITDA beta levels or somewhere 16% to 17% levels.
iv. Order book: 1.5X expected FY25 revenues
Order book as of end of Q2-24 is 1.5 times the Rs 2,000 cr revenue expected in FY25. Rs.2,500 crores to Rs.3,500 crores of order inflow expected from the Rs.17,500 crores of enquiries under negotiation provides visibility into FY26 revenue.
the current order book what we have is to be delivered in next 15 month’s time
Currently, we have inquiries about 17,500 crores under negotiation and meeting stage
let's say 15% to 20% is typically the conversion. So, one can look at a range of somewhere between Rs.2,500 crores to Rs.3,500 crores of order inflow.
9. EBITDA growth of 382% & Revenue growth of 90% in H1-25 at a PE of 86
10. So Wait and Watch
If I hold the stock then one may continue holding on to TARIL
Based on H1-25 revenue of Rs 784 cr, the FY25 guidance of Rs 2,000 cr looks achievable as H2 is typically bigger than H1. FY25 guidance is achievable and orders under negotiation are pointing to a strong order book to support FY26 growth.
TARIL is aggressively expanding its manufacturing capacity, particularly for solar and green hydrogen transformers to deliver on the strong order book. The new facilities are expected to significantly contribute to revenue generation from FY26 onwards.
We are expanding our Changodar plant. So, December 2024, Changodar plant is being expanded to include solar transformers and green hydrogen transformers
TARIL is pursuing backward integration to secure critical component supplies, and support the guidance for margin expansion. The company's foray into tank manufacturing is expected to generate significant cost savings and potentially open new revenue streams.
the backward integration is going to add at least 100 bps in my standalone books on the EBITDA margin levels.
We already started working on the backward integration side on the fabrication unit as one of the largest fabrication unit we are working on that, work has started on that part
The Indian power transmission and distribution (T&D) sector is experiencing robust demand driven by government initiatives, grid expansion, and renewable energy investments. TARIL, with its strong order book and pipeline, is well-positioned to capitalize on this positive market backdrop.
11. Join the ride
If I am looking to enter TARIL then
TARIL has delivered PAT growth of 382% and revenue growth of 90% in H1-25 at a PE of 86 which makes the valuations fully priced in the short term.
TARIL is guiding for EBIDTA growth of 87-90% and revenue growth of 43% in FY-25 at a PE of 86 which makes the valuations reasonably priced from a FY25 perspective.
The guidance of EBITDA CAGR of 75-85% & Revenue CAGR of 52-57% by TARIL for FY24-27 with improving margins at a PE of 86 creates opportunity from a long term perspective.
The opportunity in TARIL is based on strong execution till FY27. At a PE of 86 the margin of safety is limited. If the execution does not happen as per the guidance there will be substantial downside in TARIL
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