Transformers and Rectifiers (TRIL) Stock Soars 686% in a Year: Why It’s Still a Strong Buy

• Transformers and Rectifiers India (TRIL) has delivered exceptional returns, surging 686 percent in the last year and 177 percent in 2024 YTD.
• Despite these impressive gains, Antique Broking has initiated coverage on TRIL with a target price of ₹847, suggesting a further 32 percent upside.
• “TRIL’s revenue and earnings are expected to grow 3.5x and 10x by FY27E,” stated Antique Broking, highlighting the company’s ambitious growth plans.

Discover why Transformers and Rectifiers India (TRIL) remains a compelling investment despite its recent meteoric rise.

Stock Price Trend

The stock has shown consistent growth, rising over 2 percent in May, extending gains for the third consecutive month. It surged 58.5 percent in April and 14.3 percent in March. Although it dipped by half a percent in February, it jumped over 50 percent in January 2024.

Long-Term Performance

Currently trading at ₹640, TRIL is 16.5 percent below its record high of ₹766.2, achieved on April 24, 2024. From its 52-week low of ₹76.24 on July 21, 2023, the stock has soared 739 percent. Over the long term, TRIL has delivered astounding returns, rallying 2338 percent in three years from ₹26.25 in May 2021 and 4767 percent in five years from ₹13.15 in May 2019.

Investment Rationale

Leading transformer player with a wide range of products: TRIL is a leading transformer manufacturer with a vast product range and a manufacturing capacity of 37,200 MVA, second only to BHEL. It holds a market share of 22-25 percent and is the sole manufacturer of specialty transformers like Electric Arc Furnace (EAF) and Green Hydrogen Energy Application Transformers.

Capacity expansion — the beginning of a high-growth phase: TRIL’s capacity expansion at the Changodar plant is underway, adding 12,000 MVA primarily for manufacturing Inverter Duty Transformers (IDTs), expected to be completed by 4QFY25. The company is also exploring the acquisition of idle transformer manufacturing capacities.

Backward Integration — A Margin Driver

TRIL’s backward integration into key inputs like tanks, radiators, CRGO, and bushings is a strategic move to address emerging shortages and drive margins. The company is set to ramp up production of these components substantially by FY26.

Transmission Capex on a Strong Rebound

India’s transmission capex, pegged at ₹4.8 lakh crore over FY23-27, promises significant demand for T&D equipment. With plans to add 1,23,577 ckm of transmission lines and 7,22,940 MVA of transformation capacity, TRIL is well-positioned to benefit from this surge in demand.

Several New Avenues of Growth Emerging

Emerging growth avenues across sectors like railways, data centers, manufacturing, and exports present additional opportunities for TRIL. With the global demand for renewable energy rising, TRIL stands to capitalize on these lucrative prospects.

Conclusion

Antique Broking expects TRIL to report exponential growth over the next three years, with revenue and PAT rising by 3.6x and 10x in FY27 from the base of FY24. The company’s investment plan of ₹500 crore and the announcement of raising ₹500 crore in capital are key drivers. TRIL’s EBITDA margin is expected to improve from 10 percent to 16 percent by FY27, supported by strong revenue growth and a better revenue mix favoring exports and services. Despite a significant re-rating in 2024, TRIL trades at a discount to its peers, with the valuation gap expected to narrow in the coming years.