Multibagger stock in focus: In its latest report, global brokerage firm Phillip Capital has initiated coverage on Vilas Transcore with a ‘Buy’ rating and a target price of ₹638 per share, citing the company’s strong positioning in India’s rapidly growing energy sector.

The brokerage also highlighted Vilas Transcore’s robust financial metrics, which it believes are particularly relevant given the working capital-intensive nature of the transformer component industry.

Vilas Transcore is engaged in the manufacturing and supply of components used in the power distribution and transmission sector, catering primarily to transformer and other power equipment manufacturers in India and overseas. The company’s shares debuted on the Indian stock market in June 2024, listing at ₹225 apiece compared to the IPO price of Rs147. At current levels, the stock is trading at ₹392 apiece, which is 166% higher than its IPO price

Its product range includes electrical lamination cold-rolled grain-oriented (CRGO) cores, CRGO slit coils, CRGO stacked (assembled) cores, CRGO wound cores, and CRGO toroidal cores—components primarily used in power, distribution, and dry-type transformers, as well as in high-, medium-, and low-voltage current transformers.

The brokerage noted that CRGO steel accounts for 30–35% of a transformer’s total cost, making it the single largest cost component in transformer manufacturing. Cold-rolled grain-oriented (CRGO) steel is a specialized electrical steel used primarily in transformer cores, motors, and generators.

Its grain orientation significantly reduces core losses, making it essential for improving the efficiency and performance of electrical equipment. As utilities and private players ramp up investments to meet escalating power demand, niche manufacturers of CRGO steel cores are emerging as key beneficiaries.

Vilas Transcore Ltd., one of the few listed pure-play CRGO manufacturers in India, stands at the forefront of this opportunity.

CRGO demand set to surge

CRGO (cold-rolled grain-oriented) steel, essential for efficient transformers and accounting for 30–35% of their cost, is facing a supply crunch in India due to non-renewal of BIS export licenses for major Chinese suppliers.

With India importing most of its 325,000-ton annual CRGO need from China, South Korea, Japan, and Europe, the shortage—especially of high-efficiency Hi-B grade—has driven up prices and strained transformer production.

Global output stands at 3 million tons, with China contributing 45%. Domestic transformer makers and DISCOMs are struggling, threatening delays in infrastructure projects. As India pushes toward 500 GW renewable capacity by 2030 and mandates stricter transformer efficiency norms from January 2025, CRGO demand is expected to rise 10–12% annually.

Well-timed expansion to capture power sector boom

The brokerage said the company is well-positioned to benefit from the multi-decade infrastructure opportunity unfolding in India’s power sector, particularly within the transformer manufacturing value chain.

With its ongoing capacity expansion (3x to 36,000 MTPA), robust balance sheet, and entry into higher-margin product lines such as radiators, amorphous cores, and nanocrystalline cores, VTL is poised for significant scale-up in the coming years.

Its strategic location in Gujarat, strong customer relationships, and focus on serving organized transformer OEMs position it favorably as the sector shifts towards greater quality and efficiency.

VTL also maintains a healthy cash balance, offering a buffer against input cost shocks or demand-side fluctuations. Its capital structure allows financial flexibility to fund growth capex without diluting equity or increasing debt.

In contrast, a large part of the industry—comprising unorganized and smaller players—operates with high working capital requirements and limited liquidity, placing VTL in a structurally stronger financial position. Phillip Capital estimates an FY24–27E revenue, EBITDA, and PAT CAGR of 31.8%, 37.7%, and 38.9%, respectively.

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