How do we get the export values earlier?
I would be cautious to invest in Shilchar due to OPM being way too higher than industry standards, i know management says they export much and but their major exposure is in mid kv transformers where i dont think margins are high ( i might be wrong because there is competition in this area ) i know that high end transformers beyond 220 kv have better margins if anyone have clarity on margins please lmk. Keeping aside margins in terms of valuation lets assume company does 850 crores revenue in FY26 and 24% NPM still its trading at 19x forward PE , where its long term median PE is at 19x with uncertainty of Tariffs in North America its quite a risk while markets pricing in best case scenario.
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Volza provides the export data as and when the Export happens, with a slight delay of 10-12 days.
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Shilchar is into mid kv IDT, where the competition is least but is now rising with big players entering this category. The margins are high because of significant export contribution which I donât think any other player has. The new tariff structure could be a problem, but since the US government is asking for reciprocal tariffs, and we can see that India doesnât have a very high tariff rate on import of transformers, hence this category is highly likely to remain unaffected. Shilchar is also diversifying itâs customer base, with new tieups in EU and Gulf regions.
Also comparing the 5 year Median PE, and todayâs PE wonât be an apples to apples comparison because in the last 2-3 years, company has demonstrated solid margin expansion, so I do think it commands a higher PE compared to what it has gotten historically.
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IDTs space has multiple players, and it has low entry barriers, even with significant exports i donât think a company will have difference of 10% with industry (industry OPM is 10-20% while other players also do have export exposures not as much as shilchar), now in terms of valuations if this is peak margin scenario you cant assume it will get 40-50x just because top line is growing. I know there is strong demand for transformers in domestic markets but there is problem in land evacuation, power evacuation etc in domestic market although there could be strong order book but execution can get delayed. while there is alot of uncertainty in American market not only due to tariffs but trump dis regarding Renewable energy and going all out on drilling, still US needs massive transmission upgrades. And on European tie ups this might take years, because approvals are unreasonably slow in developed countries. T Just pointing out some anti thesis pointers.
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Shilchar FY25E revenue guidance is Rs500-550crs which implies FY25E PAT should be Rs128crs
Shilchar guiding for Rs750-800crs revenues in FY26E. If I extrapolate trailing 12 months PAT margins for FY26E the PAT should be Rs187 crs (uop 46% YoY) implying stock is trading at P/E of 22.3x at current market cap of Rs 4171 crs which is not demanding at all.
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Shilchar announces increase in authorized share capital of 15 Crs (1.5 Cr equity shares). Should help them raise funds for further expansion. The tariff saga might just dismiss it to oblivion though.
I dont think US Tariff will affect it. Energy is exempted from Tariff list and there is no further announcement regarding any change in that stand. They have good margin for a reason. The products are custom designed by the promoter who is a technocrat and personally involved at design stage. US transformers shortages due to upgradation are running into 3 year delivery period. besides 52% is for USA . So price decline should not dictate the narratives. Pls read the concalls . U will know their capabilities.
Disclosure. Invested and pruned some quantity around Rs 7000. No transaction for last two months.
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They are setting the new total Authorized Share Capital to 1.5 Cr shares. Current no. equity shares = 0.76Cr. Meaning they are diluting by nearly 50%. One thing that still needs to be clarified is if this increase will be all at once or phased over time (I might have missed it). An EPS drop of 50% is significant, even if these funds will go towards future expansion. Not to mention the potential tariffs. In the short term, this is going to be more pain isnât it?
Am I missing something?
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When compared to TARIL kinda baffling
here my thesis about why there is breakdown in price
1: Very low float with just 76 lakh total shares and 67 percent locked between promoters and institutations makes the stock expensive on paper
I think its more about investor base in TARIL there is impulsive investor base due to low cost to entry but shilchar has much more prudent investor base, waiting for expansion plans and other clarifications. So retail is not buying
to compliment that FII has been selling DII not buying enough
Talking about numbers stock is still far from decent valuations for power company
DCF is 2422 as of now so until and unless valuation comes closer to this value not sure if smart money is going to flow in.
Doubts about renewables due to TRUMP has caused another issue. They have far too much exposure to renewables.
So overall looking like weak hands who invested by just seeing the growth numbers on peak are taking exits causing downtrend in the stock. There is merely 30-50k stocks traded on average.
Do take the opinion with bucket full of salt.
Disclaimer : Exited full postion around 7000 mark.
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EPS would only drop if these new authorized shares are issued right? Theyâve just increased it perhaps to raise funds for the new expansion. Companies increase their authorized share for a myriad reasons; could be for ESOPs, mergers/acquistions besides future fundraise no?
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Clarifying few points based on some of the messages above
1- Increase in authorized share capital does not automatically mean equity dilution.
2- Shilchar may or may not need a lot of capital. As per Sep-24 balance sheet they have 60 crores of cash and 0 debt. They would have generated some more cash in the past two quarters, and so expect them to make right call on new capital requirements.
3- We all know now that the Trump has paused Tariff for 90 days for all countries but CN. Anyway my understanding was that Energy was not part of it. I do not see demand tampering because of tariff now or in near future.
4- There was an article in Hindu Businessline yesterday that Transformers companies have their hands full for the next two years. This exactly is what we have heard in the last few earnings calls from the main listed transformer companies of India.
5- I have no comments to offer on the valuation (and using DCF for that) part. Just want to call out that it is one of the those companies which is generating good cash flow, has no debt, good runway (demand for product), run buy a promoter who understands product and tech and has high holding in the company, and the stock is available for 30 times TTM earnings. Further there is good reason to believe that the earnings would grow north of 30-40% in the next year.
I have ownership bias. Not a buy/sell reco.
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Shilchar calls for board meeting on April 21 to consider Results, Dividend, Bonus and any other items - hopefully it includes updates on expansion plans. Bonus can be 1 share for every 2 shares held.
Disc : Holding from lower levels - no transactions in last 6 months
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Outstanding results.
There is a massive increase of about 135 crores in trade receivable ! We have to understand from management in concall where this money is stuck up. Is there any particular customer who is not paying-up?
How soon will company receive this money?
Also please find Eric Schmidt talking about massive impending electricity and related infrastructure demand in US due to AI. This is a multi-year demand.
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Super Q4 results from Shilchar (after TARIL)
As pointed out above, the only area of concern seems to been ballooning of the Receivables to 135 crore (which has likely reduced their cash flow significantly). The explanation from management would be crucial on this point here
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Possibly few transformers might have got dispatched on last day of the month and payments may have been linked to LCs or something like that which could not have been encashed. Hopefully will get clarity tomorrow.
Market may be bit happy and disappointed - Happy because they reached 100% utilisation in Q4 itself - much ahead and Disappointed because there are no firm plans for expansion.
Let us see how the price behaves both before and after the con call.
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This is the most important slide from investor presentation.
Company has utilised 77% of capacity in FY25, given full capacity utilisation in q4 and robust demand outlook both domestic and exports we can very safely assume full capacity utilisation in FY26.
At current prices, 100% capacity utilisation will give a revenue of 809 crores with is a 30% increase yoy and at present margin gives a net profit of 191 crores and eps of Rs. 250.
Based on todayâs price of Rs. 6389, company is trading at forward PE of 25.
Any expansion will be icing on the cake.
Does this look cheap or costly to you for a multi-year growth story from a high quality out-performing management?
Disclosure - Invested.
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Good points, Thanks for sharing this important slide on capacity utilization.
Now, considering full 100% utilization by FY26, approx EPS is Rs 250 (based on todayâs closing price). Considering a 30% YoY Revenue and profit growth we can think the share price can move 30-40% by next year.
What after that? It can take a few years to build new capacities. There are companies like Voltamp which are good but no growth due to no immediate capacity expansion possible. So let us hope and see what is managementâs commentary on capacity expansion.
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I feel management guidance is conservative of 750 cr. At full capacity they achieved 232 cr.
If we take the bull case and the plant can run at full capacity for the full year we could potentially also see - 232x4 - Around 928 crs revenue. But that would be the bull case
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