It was founded in 1990 to manufacture R-core transformers. In 1995, after an overwhelming response from the market, the company ventured into the manufacturing of Ferrite transformers. As part of its expansion plans, it started manufacturing Distribution and Power Transformers in a phased manner from 2005 to 2007.

Shilchar now caters to a wide cross section of industrial segments from utility to renewable energy sector and to individual retail customers across the globe.

The company is engaged in manufacturing of Distribution Transformers ranging from 5 KVA to 3000 KVA and Power Transformers ranging from 3000 KVA to 50,000 KVA.

It focuses on manufacture of solar and windmill transformers for renewable energy sector.

March 2019 quarter results

In March 2019 quarter sales grew 15% to Rs 29.46 crore. OPM fell 250 basis points to 8.3% which saw OP fall 11% to Rs 2.44 crore.

Other income grew from Rs 2 lakh to Rs 15 lakh and interest cost jumped 149% to Rs 79 lakh. As depreciation grew 114% to Rs 63 lakh, PBT went down 29% to Rs 1.53 crore. As provision for taxation fell 18% to Rs 37 lakh, PAT went down 32% to Rs 1.17 crore.

FY 2019 results

In FY 2019 sales grew 35% to Rs 118.39 crore. OPM jumped 130 basis points to 12.0% which saw OP grow 51% to Rs 14.23 crore.

Other income grew 45% to Rs 1.67 crore and interest cost jumped 124% to Rs 2.80 crore. As depreciation grew 110% to Rs 2.43 crore, PBT went up 31% to Rs 10.67 crore. As provision for taxation went up 28% to Rs 2.93 crore, PAT jumped 32% to Rs 7.75 crore.

Transformer market is seeing improvement in demand from industrial and renewable sectors

Currently transformer industry is operating at around 65% capacity utilisation. Many players have started doing other businesses as well and focus on transformers from some of the competitors has reduced. Despite this, competition continues to remain.

No capacity addition in the industry in past 8 years.

Efficiency side improvement capex is seen from private sector. New norms and more focus on efficiencies is resulting in demand for transformers from industries like chemicals, speciality chemicals, food processing, refining etc. Lot of enquiry are pouring in from various other industries as well which is likely to get transformed into demand in coming times.

Solar transformer side demand is improving from government and private sector. GST related issues are largely over.

Sales from renewable energy now accounts for around 50% of company's sales as compared to 30% in past couple of years. Gradually, the target is to take sales to renewable sector to around 60% of total sales.

In Renewable the company primarily caters to Solar transformers. It also exports the solar transformers to Asia Pacific markets.

Margins in solar transformers are normally much higher than in other transformers.

Expanded capacity has potential to triple revenues

The company has invested heavily on new production facility located on Jambusar highway. The new facility is state-of-the-art with modern equipments and material handling system. Company has invested approximately Rs.36 crore in this facility which will increase revenue by three folds once utilized 100%.

Outlook

Indian transformer manufacturers are witnessing improvement in financial performance, with moderation in raw material prices and revival in order inflows.

Planned investments in power sector, replacement demand, export potential and development of inter-regional capacity is likely to sustain the demand of transformers in near to medium term.

In the present scenario, Shilchar Technologies has concentrated on updating its technical capabilities to develop transformers of latest technology and design and in turn strengthen its market share and improvise its profitability.

Growing Indian economy, growth in electricity consumption, growing industrial demand, expanding export market, large scale generation capacity addition, setting up of national grid, rapid expansion of urban and rural distribution infrastructure will remain key drivers of the transformer market in India.

Valuation

The board of directors have declared dividend of Rs 2 per share.

The stock trades at Rs 291.