Virtuoso Optoelectronics Ltd - A promising micro Cap

Company has received a demand for GST of 4.7 crores.

Have you also considered epack durable in your analysis?

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the whole EMS space should do well. Voepl looked favourable vs others quoting above 100 PE
E pack sadly has a poor Q2 earnings wise. Top down the whole sector has been a great wealth creator. Most players are 150-200 + multiples. So Voepl and others below 100 PE look much favourable to me. But thats just my opinion. U can model the business via guidance. I assume e pack would have also given a good guidance.

60% of the stock Px appreciation is coz the sector does well. And stocks move in tandem to each other. So any pick should do.

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Freezer space - refrigeration growth engine can sustain after this and could command a better valuation multiple

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  • Voltas channel inventoy is healthy
    Sounds right for VOEPL too. Good summer season which got elongated plus recent annoucements to diversify a bit into refrigeration

Virtuoso ( Chota PGEL) - Additional PLI

Budget does mention around Toy Sector - Lot of measures announced to make India a hub of Toy manufacturing

As per Virtuoso concall they also do revenues from Toys

Budget - PLI - EMS

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Virtuoso Optoelectronics Q3 ; Co. says Company is on track to achieve the projected revenue of Rs ~700 Cr in FY25 and is looking forward to a growth of 45-55% YoY in the coming financial year, with the help of increased capacities.

The company has successfully begun commercial operations of its Commercial Refrigeration (starting with Chest/Deep Freezer) manufacturing facility at Nasik, this unit has an annual capacity of 1.5 lac units and this will be ramped up to 4 lac units in the next FY.

The company has successfully begun commercial operations of its component manufacturing unit at Chennai that will be run under its wholly owned subsidiary Virtuoso Polymers Private Limited (VPPL), this unit has capacity of 4000 sets per day

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19th feb Meeting with MGMT Highlights:

Capacity Expansion and Product Development

Compressor Segment

  • VOEPL has partnered with two Chinese compressor manufacturers, Huayi and Jiaxipera, with a total capacity of 70-75 million units per annum for reciprocating compressors.

  • Two types of compressors exist:

    • Rotary compressors : Used for air conditioning.
    • Reciprocating compressors : Used for refrigeration (both commercial and domestic).
  • Machinery for compressor production is expected to arrive by the end of March, with production commencement planned in the first two quarters following setup.

  • A semi-automatic washing machine production line is being established, expected to be operational by Q3 FY26.

  • The air conditioning (AC) segment is currently facing capacity constraints, prompting capital expenditure (capex) to enhance production capabilities. Existing customers will continue to be served.

  • Commercial dispatch of freezers has commenced, with an anchor customer onboard along with several smaller clients.

  • The company plans to introduce 100L freezers and a new glass-top series. Additionally, 600-700L freezers are expected to be launched in the upcoming quarter.

Virtuoso Polymers Expansion

  • Operations have commenced in Chennai, with production beginning from Unit 1.
  • Unit 2 is planned, with commercial production expected by Q3 FY26.

Financial Projections and Revenue Guidance

  • The company aims for a topline of ₹2,000 crore by FY27, comprising a mix of all product segments.
  • Refrigeration demand is expected to be strong, though compressors production will have a gestation of a 6-9 months period before contributing significantly.
  • The company plans to renew its ₹1,200 crore revenue guidance for FY26, assuming 60-70% capacity utilization, which is considered a reasonable estimate. FY25 Revenue guidance remains at 700 Crore.
  • Compressors alone are expected to generate ₹400-₹500 crore in revenue, with an estimated 9% margin.

Margins and Profitability

  • EBITDA margins: 9% ± 1%.
  • PAT margins: 2-3%.
  • Newer segments, such as commercial refrigeration, are expected to yield higher margins:
    • Commercial refrigeration: 10%
    • Compressors: 8-10%
  • Given that AC and refrigeration compressors share similar supply chains, the company expects operational efficiencies.

Capital Expenditure Plans

  • FY25 Capex: ₹110 crore.
  • Projected FY26 Capex: ₹110 crore.
  • Total Capex for FY26-27: ₹250 crore.
  • The company will prioritize debt financing for capex requirements.
  • Phase 1: Compressor capacity expansion (₹70 crore investment for 2.8 million units).
  • Phase 2 & 3: Backward integration (₹50-60 crore additional investment for sub-assemblies from China).

PLI Incentives

  • Production Linked Incentives (PLI) benefits will commence from next year, contributing an additional ₹20 crore in FY26 and FY27.

Industry

  • The overall AC market size is 12 million units, while the refrigeration compressor market stands at 20 million units.
  • The expiry of BIS certifications in China for reciprocating compressors (January 2026) is expected to create a supply gap in the Indian market.
  • Out of four BIS licenses, three will lapse in June 2025, and the last one in January 2026, potentially leading to a 15 million unit shortfall in the Indian market.
  • This anticipated shortage is likely to drive stockpiling of compressors in Q4 FY26 and Q1 FY27, with the company expecting full booking of its production capacity.
  • The Indian market currently produces 4-5 million compressors (by Godrej and others), while the remaining demand is met through imports and smaller manufacturers. There exists a gap to be filled by a properly organised company like VOEPL.
  • Compressors are priced between ₹1,500-₹1,800 per unit.
  • Current refrigerator compressor capacity is 2.8 million units, with plans to double this to 5.6 million units by the beginning of FY27.
  • The company aims to match or slightly undercut Chinese pricing (3-5% lower).
  • In commercial refrigeration, all clients are new, with significant brands in the pipeline.
  • Only 2-3 major brands (such as Blue Star, Voltas) have in-house compressor production capacity, while others rely on imports and smaller manufacturers.

Washing Machine Segment Strategy

  • The semi-automatic washing machine market in India sees annual sales of 2-2.5 million units.
  • Most manufacturing is concentrated in North India, while VOEPL aims to serve the West and South markets.
  • Regionality plays a critical role in washing machine production because of high transport costs.

Utilization Rates and Seasonal Trends

  • Indoor Unit (IDU) utilization: 75%.
  • Outdoor Unit (ODU) utilization: 100%.
  • Q3FY25 performance expectations: Typically lower margins due to an increased ODU share; however, new additions are expected to compensate for this.
  • Washing machines perform well in Q2 and Q3, while AC sales peak in Q3 and Q4.

Corporate Developments and Fundraising

  • The company will file for NSE listing post-September 2025.
  • SEBI approval is pending regarding warrant issue; the latest update from the December 16 meeting suggests progress.
  • SMEs with over ₹25 crore of paid up capital can raise funds exceeding under the revised guidelines.
  • The company is set to receive ₹60 crore from warrants, adding to ₹40 crore+ in existing funds for future plans.
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Hey Sagnik,
I think the 2000cr figure for FY27 was for capacity and not revenue guidance.

With 1200cr FY26 Guidance and 35-40% growth the number should be 1600-1700cr on higher side.

Can you confirm the guidance numbers?

Thanks

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Hi, the guidance is as follows:

FY25: 700
FY26: 1200 (mgmt says that this figure will be revised upwards soon)
FY27: 2000

figures in INR Cr.

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Hi, I am not able to find the recording of the 19th Feb, 2025 investor meeting that happened.
Can you share the same here if it available with you

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Hi, the meeting was private. No recording available

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