SME BUY

SEBI Research Analyst Registration No: INH000009843

Virtuoso Optoelectronics Ltd (VOEPL)

Initiating Coverage
01st February, 2024

CMP: ₹267 | Target Price: ₹451.2

Upside Potential: 69% | Duration: 2 Year

Market Capitalisation: ₹609.8 Cr.

Lot size: 500 Quantity

Market Capitalisation : ₹732 Cr

Research Analyst – Tushar Raghatate, Pratik Kulkarni, Nitya Shah

Investors are advised to refer through important disclosures made at the

end of the Research Report.

tttt
INDEX

SUMMARY ............................................................................................................................................................................ 3
CORPORATE GOVERNANCE......................................................................................................................................... 4
PROMOTERS AND MANAGEMENT TEAM ................................................................................................................ 5
INDUSTRY ANALYSIS ....................................................................................................................................................... 6
THE COMPANY................................................................................................................................................................... 9
MARQUEE CLIENT LIST ................................................................................................................................................. 16
TRIGGERS ........................................................................................................................................................................... 17
RISKS.................................................................................................................................................................................... 19
PRICE DATA....................................................................................................................................................................... 20
FINANCIALS....................................................................................................................................................................... 21
FINANCIAL SHENANIGANS ......................................................................................................................................... 25
VALUATIONS ..................................................................................................................................................................... 26

SEBI Research Analyst Registration No : INH000009843 www.kamayakya.com

 SUMMARY

• Established in 2015, Virtuoso Optoelectronics Ltd. (VOEPL) is a manufacturer of consumer durable

goods and assembles a wide array of products and provides end-to-end product solutions. they serve
under both original equipment manufacturer (OEM) and original design manufacturer (ODM)
business models. Under the ODM model, they manufacture and supply products based on designs
developed by their customer, who then further distribute these products under their own brands.
Under the ODM model, in addition to manufacturing, we conceptualize and design the products which
are then marketed to VOEPL’s customers’ prospective customers under their brands.

• VOEPL operates under 3 categories; A/C Manufacturing, EMS & Lighting, and Water
Dispenser/Commercial Refrigeration (yet to start), major business is coming from A/C business where
it has a capacity of 600,000 units for Indoor units (IDUs) and 250,000 Outdoor unit (ODUs) while Cross
Flow Fans (CFF) has capacity of 480,000 units. While Capacity in lighting (in terms of lamp equivalent)
is 3.4 Crore units. Whereas Water Dispenser and Commercial Refrigeration is a new segment that will
start in Q4FY24/H1FY25.

• VOEPL operates through 4 manufacturing sites situated in Nashik, in which most of the goods are
backwards integrated for A/C manufacturing such as Controller boards, sheet metal parts, A/C
remote, Cross Flow Fan, Plastic Injection Molding and the company is aiming to add brass components
and BLCD motors which is currently being import.

• VOEPL has a strategy to add one anchor client in every segment which will give high turnover from a
single client assuring revenue hence, In the A/C segment they’ve Voltas as a client which contributes
major revenue for the A/C segment and for lighting business there is Panasonic which contributes
major chunk. Combining both it contributes more than 80% of the business and also provides
diversification due to multiple products. Other clients include; IHCL, Polycab, Ariston (Thermo Group),
Pressfit, etc. The company is also part of the PLI benefit given by Govt. of India where VOEPL has
sanctioned an amount of ₹50.50 Cr. for White Goods products and some GST relaxation from the
Maharashtra Gov.

• VOEPL has clocked Revenue CAGR of 57% from ~₹55 Cr. to ~₹337 Cr. for the period of FY19-FY23.
While EBITDA Margins improved from 5.2% in FY19 to 10.1% in FY23, which led to an increase in the
PAT from ~₹0.55 Cr. in FY19 to ~₹7.8 Cr. in FY23 which is 94% CAGR. For H1 FY24 company did ₹238
Cr. of topline with 10% of EBITDA margins and PAT came at ₹3.5 Cr. which is on the path of the
company’s prospect.

SEBI Research Analyst Registration No : INH000009843 www.kamayakya.com

 CORPORATE GOVERNANCE

Positive Negative

Checklist Remark
Auditors' opinion Unmodified
Auditor change No frequent change
Promoter pledged % No promoter pledge
QoQ results reporting As per the compliance, SME companies are not
bound to give QoQ result. Although giving QoQ
result shows investment friendliness
Conference call Yes, shows investment friendliness
Investor presentation Yes, shows investment friendliness

SEBI Research Analyst Registration No : INH000009843 www.kamayakya.com

 PROMOTERS AND MANAGEMENT TEAM

MR. SUKRIT BHARATI, PROMOTER, MD & CEO

• He is a Master in Science – Engineering Technology from

BITS Pilani and Diploma courses in Management subjects
from Harvard Business School and NMIMS, Mumbai.

• Further, he has completed a certification course from the

Seed Transformation Program, at Stanford University which
is a year-long, on-the-ground leadership program for
established founders and CEOs in emerging economies
focused on growing their businesses and increasing the
positive impact they have in their communities.

• He is taking an annual remuneration of ₹0.30 Cr. which is a

~3.85% of FY23 PAT of ₹7.8 Cr.

MR. SAJID SHAIKH, CHIEF FINANCIAL OFFICER (CFO)

• He is an MBA with over 25 years of experience across the

banking & finance sector. Strong experience in financial
modelling, debt financing, networking and fundraising.

• He is also responsible for product development, and the

functional and technical department of the company.

SEBI Research Analyst Registration No : INH000009843 www.kamayakya.com

 INDUSTRY ANALYSIS

• Over the past decade, the EMS industry has surged, notably in the last five years, fueled by India's
burgeoning electronics sector. This growth stems from various factors, including rising disposable
incomes, favourable duty structures, and significant public procurement for initiatives like rural
electrification and e-governance. With a robust domestic market and expanding export
opportunities, India's electronics industry has emerged as a global player, renowned for its R&D
capabilities, design services, and manufacturing prowess. Positioned as a top low-cost
manufacturing destination, India continues to capitalize on cost advantages amid rising global
expenses, solidifying its competitive edge.

• The government's vision for the electronics industry is clear: to establish India as a global ESDM
hub. This ambition is propelled by initiatives aimed at fostering capabilities within the country for
developing core components and facilitating a conducive environment for global competitiveness.
Key strategies include incentivizing the entire ecosystem through schemes like Production Linked
Incentives (PLI) for various sectors, Phased Manufacturing Programs targeting mobile phones and
related components, the Scheme for Promotion of Manufacturing of Electronics Components and
Semiconductors (SPECS), and the Electronic Manufacturing Cluster (EMC) 2.0. These measures
underscore India's commitment to becoming a prominent player in the global electronics market.

• These incentive schemes are poised to catalyze investment across the entire value chain of the
Indian electronics industry. By nurturing a local manufacturing ecosystem, they will fortify the
domestic supply chain, leading to enhanced market responsiveness, shortened lead times, reduced
foreign exchange outflow, lower component and logistics expenses, and increased affordability of
electronic products in the foreseeable future.

• The total addressable EMS market in India, valued at ₹2,654 billion (USD 36 Billion) in FY21, is
projected to reach ₹9,963 billion (USD 135 Billion) by FY26, with a remarkable CAGR of 30%. Despite
this growth, Indian EMS companies currently contribute approximately 40%, amounting to ₹1,069
billion (USD 14 Billion) in FY21, and are anticipated to expand at a 41% CAGR, reaching ₹5,978 billion
(USD 81 Billion) by FY26.

• India’s Air Conditioner Market is projected to reach $399.88 billion by 2028 growing with a CAGR of
7.66% from 2022 to 2028. As India’s population continues to grow and its economy undergoes a
transformation, the air conditioning industry has emerged as one of the fastest-growing industries
in the country.

SEBI Research Analyst Registration No : INH000009843 www.kamayakya.com

 • India's AC market is categorized into Room Air Conditioners, Ducted Air Conditioners, Ductless Air
Conditioners, and Centralized Air Conditioners. Among these, the room air conditioner segment
stands out as one of the world's largest and fastest-growing markets. This growth is predominantly
fueled by escalating demand for residential air conditioners, driven by a rising number of middle-
class households with increased disposable incomes investing in home appliances like air
conditioners. Additionally, the ongoing trend of urbanization has resulted in more individuals
residing in compact living spaces, necessitating smaller and more efficient air conditioning solutions
to cater to their needs.

• India stands as the second-largest LED market worldwide and the fastest-growing market in the
Asia-Pacific region. The recent halving of excise duty on LED components from 12% to 6% has
propelled domestic manufacturing, with LED market share soaring from 0.3% to an impressive 46%.
With the Government of India's unwavering commitment to the Smart City development paradigm,
the demand for energy-efficient technologies, products, and services, including LED lights, is
projected to surge significantly. The LED light market, valued at USD 2.8 billion in 2021, is forecasted
to escalate to USD 9.8 billion by 2027, boasting a robust CAGR of 23.31% for the same period.

• The Indian Deep Freezer Market, valued at $474.82 million in 2022, is forecasted to exceed $3,234.23
million by 2031, with a notable CAGR of 25.2% during the period 2023–2031. This growth surge,
highlighted by the sale of approximately 1.3 million units in 2022, reflects a rising demand from
households and commercial establishments. Both domestic and international brands contributed
to this expansion, with the top three brands collectively selling over 800,000 units, showcasing
heightened market competitiveness. Household deep freezers, priced at an average of $188, offer
a cost-effective solution for consumers, while commercial variants, necessitating larger storage
capacities, carry an average price of ₹625, reflecting varied functionalities and features available in
the market.

SEBI Research Analyst Registration No : INH000009843 www.kamayakya.com

 • The water dispenser market is on the brink of expansion, driven by a growing awareness of the importance
of access to clean, safe drinking water. Globally, the industry is experiencing a surge propelled by
escalating groundwater contamination, rising demand for clean water, urbanization, industrialization, and
dwindling natural water resources. Moreover, advancements in water purification technologies and the
availability of cost-effective, energy-efficient water cleaning products are poised to further bolster market
growth.

• The global water dispenser market is projected to reach a size of $2,723.1 million by 2023, with sales
expected to grow at a robust CAGR of 8.9% from 2023 to 2033. By 2033, the demand for water dispensers
is forecasted to reach a valuation of $6,383.1 million.

• Voltas holds the dominant position in the Room Air-Conditioner market in India, with VOEPL exclusively
serving Voltas, providing it with the advantage of industry growth and potential market share expansion.
Out of every 100 air conditioners manufactured by Voltas, approximately 20 are produced by VOEPL
alone. This robust collaboration underscores the strength and promising outlook for future earnings,
highlighting the strong visibility of Voltas's market presence.

SEBI Research Analyst Registration No : INH000009843 www.kamayakya.com

 THE COMPANY

• Founded in 2015, Virtuoso Optoelectronics Limited (VOEPL) specializes in manufacturing consumer

durable goods, offering a diverse range of products and comprehensive end-to-end solutions. With a
focus on OEM/ODM services, VOEPL has emerged as a leading player in the manufacturing sector,
particularly in white goods and electronic items, notably air conditioners.

• VOEPL initiated its commercial production in Nashik with an EMS unit spanning 6,000 sq. ft. As the
company expanded, it diversified into lighting products. In 2017-18, VOEPL transitioned to a new
40,000 sq. ft. facility, welcoming Anchor Electronics, now part of Panasonic, and started
manufacturing air conditioners. By 2019, VOEPL exported its inaugural batch of A/Cs for Voltas. In
2020, the company expanded with a 48,000 sq. ft. EMS and LED facility and augmented its IDU unit
by 60,000 sq. ft. In 2021, VOEPL introduced in-house Heat Exchange & Plastic Injection Molding Lines
and developed remote & electronic parts for ACs. In 2023, Unit 3 was established for ODU
manufacturing, while IDU capacity was further expanded. Additionally, Unit 4 was set up for Cross
Flow Fans and Plastic Components.

• VOEPL broadly operates across five different verticals, namely: a) Air-Conditioning, b) EMS Business,
c) LED Lighting Segment, d) Water Dispensers (Yet to commence), e) Commercial Refrigeration (Yet to
commence). For each segment, VOEPL has a strategy to secure one anchor client, ensuring high
turnover from a single source and reliable revenue. In the Air-Conditioning segment, Voltas serves as
a major client, contributing significantly to revenue, while Panasonic holds a similar role in the lighting
business, collectively constituting more than 80% of the company's business. This arrangement not
only ensures substantial revenue but also provides diversification across multiple products. Other
notable clients include IHCL, Polycab, Ariston (Thermo Group), Pressfit, etc.

• Currently, VOEPL has a capacity of 600,000 units for Indoor units (IDUs) and 250,000 units for Outdoor
units (ODUs), with Cross Flow Fans (CFF) capacity at 480,000 units. The lighting capacity, in terms of
lamp equivalent, stands at 3.4 Crore units. With the current capex plan, by the end of FY24, the
capacity for each product will increase to 800,000 units for IDUs, 400,000 units for ODUs, and 840,000
units for CFF. The lighting capacity will remain the same as in FY23. Commercial production for the
new products is scheduled to commence in Q4FY24/H1FY25.

• VOEPL has clocked Revenue CAGR of 57% from ~₹55 Cr. to ~₹337 Cr. for the period of FY19-FY23.
While EBITDA Margins improved from 5.2% in FY19 to 10.1% in FY23, which led to an increase in the
PAT from ~₹0.55 Cr. in FY19 to ~₹7.8 Cr. in FY23 which is 94% CAGR. For H1 FY24 company did ₹238
Cr. of topline with 10% of EBITDA margins and PAT came at ₹3.5 Cr. which is on the path of the
company’s prospect.

SEBI Research Analyst Registration No : INH000009843 www.kamayakya.com

Air-Conditioner Division:

• VOEPL operates exclusively for Voltas, offering end-to-end solutions that encompass ODUs, IDUs,
components, and other raw materials. Approximately 80% of the materials are manufactured in-
house, with the remainder imported. In terms of capacity utilization, for FY23, the IDU capacity was
600,000 units, of which the company manufactured 450,000 units. Since the ODU unit commenced
production in January 2023, approximately 30,000 units were produced out of a capacity of 250,000
units. Consequently, margins were lower for the ODU segment during that period. However, for
FY24, capacity utilization is expected to increase significantly due to the company's plans to expand
capacity across all A/C segment products.

• In terms of volume utilization, there's a ratio of 1:2 for ODU vs. IDU. Recognizing this, the company
strategically boosted ODU capacity to 400,000 units and IDU capacity to 800,000 units, slated for
completion by the end of Q4 FY24. Margins for IDUs tend to be higher, typically ranging from 9% to
10%, depending on the utilization rate. Conversely, margins for ODUs are comparatively lower,
falling within the range of 7% to 8%, also contingent upon utilization rates.

• In FY23, the A/C segment accounted for approximately 70% of VOEPL's contribution. However, the
company aims to reduce this dependency to 40%-45% by FY26, diversifying its revenue streams.
Despite this shift, VOEPL anticipates significant volume growth, given the underpenetrated nature
of the industry in India. Out of every 100 A/Cs manufactured by Voltas, VOEPL produces 10-20 units.
Additionally, the company also sells IDUs to other companies, further expanding its market
presence and revenue streams.

During our visit to VOEPL, we witnessed the management's prowess

for the industry. Mr. Sajid Shaikh, the CFO, guided us through various
company units in Nashik. We also had the opportunity to meet Mr. K.
Ramesh, the factory head, who provided comprehensive insights into
the production processes and assembly lines.

1) left to right- Sajid Shaikh (CFO); K. Ramesh

(Plant head), Manan & Nitya (Kamayakya
team)

SEBI Research Analyst Registration No : INH000009843 www.kamayakya.com

 We gained a comprehensive understanding of the A/C
manufacturing process, including both Indoor and Outdoor
Units. We learned about the company's strategic backward
integration, minimising external sourcing of components.
Over the years, VOEPL has achieved significant backward
integration, and they are actively working through their R&D
facility to further reduce reliance on external sources.

2) Copper pipe division, A key raw

material used in A/C segment.

3) A/C manufacturing Site where Finished A/C outdoor units are ready to Dispatch.
(Dedicated Manuifacturing unit to cater Voltas)

SEBI Research Analyst Registration No : INH000009843 www.kamayakya.com

Lighting, EMS, and Components:

• Lighting business majorly comes from One client namely, Panasonic and the remaining
comes from different players like Ariston, Polycab, etc. In FY23, ₹70 Cr. came from the lighting
business under which VOEPL sold 2 cr. LED bulb at an average price of Rs. 30/piece while
another ₹10 Cr. of revenue came from different types of lights that the company offers. In
terms of capacity as the company have multiple SKUs in lighting, in terms of lamp equivalent,
VOEPL had 3.4 Cr. unit of capacity in FY23 and there is no plan to increase capacity in FY24
as enough capacity is already available and the benefit of operating leverage can be played
out.

• The margins in the lighting business are on the higher side of 12%-15% which upticks the
company-level margins. VOEPL believes The Gov. of India continues to focus on the Smart
City development model which is expected to accelerate the demand for energy-efficient
technologies, products, and services including LED lights. For the same, There was a
reduction in excise duty from 12% to 6% on LED components which has boosted domestic
manufacturing.

4) Manufacturing unit of LED Lights, 5) Life Testing Center for LED bulb, Part of
Ready to dispatch the LED Lights of R&D of the Lighting division.
Panasonic brand.

SEBI Research Analyst Registration No : INH000009843 www.kamayakya.com

 • The company manufactures most components for internal use, leveraging PLI benefits for
backward integration. In FY2023, EMS and component business contributed 8%-10% of
revenue, boasting higher margins (10%-12%) despite lower asset turnover. Forward
guidance suggests EMS & Component business will maintain its 10% share, given existing in-
house manufacturing for A/C processes.

• While copper and aluminium are currently imported, there are no plans to manufacture
them in-house for at least the next 2 years due to the lack of production capability in India.
However, VOEPL intends to incorporate BLDC motors, currently sourced 50:50 from imports
and Indian manufacturers. Additionally, the company is in the process of adding an
aluminium die-casting machine for use in LED lighting.

6) Moulding & CFF unit

7) Stack of component verticle

SEBI Research Analyst Registration No : INH000009843 www.kamayakya.com

Water Dispensers & Commercial Refrigeration:

• In FY24, VOEPL announced the launch of two highly anticipated products: Water Dispensers and
Commercial Refrigeration units. These products are entering a market with a high-demand
scenario, with the industry projected to grow at a 9% CAGR and a 25% CAGR in the coming years.
Leveraging years of expertise in similar categories, the management anticipates early success in this
new venture.

• Combining both segments, there will be a total capital expenditure of ₹80-100 Cr. Given the
synergies between new and existing products, this requirement is relatively low. At maximum
utilization by FY27, these segments have the potential to generate over ₹500 Cr. in revenue.
Approximately ₹70 Cr. will be spent in FY24, with the remainder allocated to FY25. By FY27, VOEPL
anticipates that 20%-30% of its revenue will come from these new categories, contributing up to 2%-
3% to the overall margin.

• The initial capacity for Water Dispensers will be 150,000 units, with potential scalability of upto
400,000-500,000 units based on product demand and company success. By FY25, the company
expects capacity to reach at least 200,000 units, with margins anticipated in the 10%-12% range.
VOEPL highlighted synergies between A/C ODU and Water Dispensers, providing a competitive edge
without compromising margins. The first batch of exports was projected to commence by
December 2023.

• Commercial refrigeration, being capital-intensive, will begin commercialization in FY25. Despite

higher initial capex, this segment offers higher margins. VOEPL anticipates achieving margins of
12%-15%, which will positively impact the company's overall margins. With an initial capacity of
150,000 units by H1FY25, the company expects a strong response from both domestic and export
markets, potentially necessitating capacity expansion by the end of FY25/H1FY26. The Indian
commercial refrigeration market is valued at $475 million and is projected to grow at a CAGR of 25%
over the next nine to 10 years.

• On a company level, VOEPL projects a top-line revenue of ₹1000Cr. by the end of FY26, with 40%-
45% originating from the A/C segment, 25% from Lighting, 10%-15% from Components, and 20%-
25% from new products (Water Dispensers and Commercial Refrigeration). The blended operational
profit margin (OPM) is anticipated to be around 9%-10%, with a profit after tax (PAT) range of 2%-
2.5%.

SEBI Research Analyst Registration No : INH000009843 www.kamayakya.com

Product Experience while conducting factory visit by KamayaKya Team Members:

8) Sample product of newly launched Commercial Refrigeration. 9) Sample product of newly launched
Water Dispenser.

• Our examination of the company's latest offerings, including the Water Dispenser and Commercial
Refrigeration units, revealed sample batches with promising potential for future upgrades. Our
experience indicates that VOEPL's products are of exceptional quality, comparable to those of
leading A-class companies with extensive experience in these product categories.

• It was observed that VOEPL dispatches its products regularly, and upon completion of dispatch, the
company absolves itself of responsibility for any external challenges that may arise thereafter.

SEBI Research Analyst Registration No : INH000009843 www.kamayakya.com

 MARQUEE CLIENT LIST

SEBI Research Analyst Registration No : INH000009843 www.kamayakya.com

 TRIGGERS

NEW ENTRY INTO WATER DISPENSERS & COMMERCIAL REF.; CAPEX IN EXISTING PRODUCTS

• In Q1/Q2 FY24, VOEPL unveiled its ambitious expansion strategy, introducing two new product lines:
Water Dispensers and Commercial Refrigeration. Both sectors boast substantial growth prospects,
with the Indian market size & global market sizes estimated at $2.7 billion and $475 million,
respectively, and anticipated CAGR of 9% and 25%. To propel this expansion forward, VOEPL has
earmarked approximately ~₹80 Cr. for capital expenditure across FY24 and FY25 combined.

• Concurrently, existing product lines are poised for substantial growth, with plans for a 50% capacity
increase in Air Conditioning components (both Indoor Unit and Outdoor Unit), translating to 8 lakhs
and 4 lakhs units, respectively. Other critical components, like CFF, are forecasted to surge to 8.4
lakh units from 4.8 lakh units in FY23. Furthermore, to enhance margins and leverage the benefits
of Production-Linked Incentive (PLI) schemes, the company is steadfast in its commitment to
backward integration. This involves capital expenditure in BLDC Motor components and brass
components, slated for completion by the conclusion of FY24-25.

• In the lighting segment, VOEPL is striving to ramp up its capacity to 3.5 Cr. units of bulbs by the end
of FY24, demonstrating the company's commitment to meeting growing market demands and
solidifying its position as a key player in the industry.

STRONG GUIDANCE FOR MEDIUM-TERM & LONG -TERM; FUNDS TO FUEL GROWTH

• The company maintains its revenue targets, aiming for ₹550 Cr. for FY24, ₹700 Cr. for FY25, and a
long-term goal of ₹1000 Cr. by FY26, with targeted EBITDA and PAT margins within the range of 8%-
10% and 2%-2.5%, respectively.

• Recent launches in Water Dispenser and Commercial Refrigeration will see combined investments
ranging from ₹80-100 Cr. Leveraging synergies with existing manufacturing capabilities, minimal
fresh capital expenditure is required. The integration of both segments has the potential to
generate over ₹500 Cr. in revenue at maximum utilization by FY27.

• For FY27, revenue diversification is planned, with projections indicating 40-50% of revenue from
A/C, 10-15% from Lighting, 10% from EMS and Component business, and approximately 20-30%
from Water Dispensers and Commercial Refrigeration. While, EBITDA margin projections are as
follows: ODUs at 7-8%, IDUs at 9-10%, lighting at 12-15%, EMS and component business at 10-12%,

SEBI Research Analyst Registration No : INH000009843 www.kamayakya.com

 water dispensers at 10-12%, and commercial refrigeration at 12-15%. The newly introduced ODU
category is anticipated to experience significant growth compared to IDUs, which might initially
impact EBITDA margins, potentially reducing them. However, the expected growth in this new
category is forecasted to compensate for the margin reduction, thus maintaining the current
overall margin levels.

• The company raised approximately ₹186 Cr. through a preferential issue and warrants at ₹255.1
per share. Noteworthy investors and promoters participated, including one major investor family
with a Rs 51 crore investment. This reduced promoter holding from 65.6% to around 59%. The
company expects a debt-to-equity ratio of 1x–1.2x after the dilution, encompassing short-term
borrowings. These actions aim to increase FY26 ROCE to around 20% from the current 13.3%.

INDUSTRY ANALYSIS OF EXISTING PRODUCTS; EXPERIENCED MANAGEMENT BACKGROUND

• The white goods industry is set for a strong 12% CAGR growth until FY25, with a projected market
size of about $13.66 billion in FY20. In India, the air conditioner market aims for 7-7.5 million units
annually, with current penetration at 4%, offering significant room for expansion compared to the
global 30%. Recent excise duty reduction on LED lighting supports local manufacturing. The LED
lighting market anticipates a 23.31% CAGR, expected to reach $9.8 billion by 2027 from $2.8 billion
in 2021, indicating substantial growth potential.

• VOEPL's CEO & MD, Mr Sukrit Bharati, brings over 13 years of industry expertise, with qualifications
from BITS Pilani and Harvard Business School. He is supported by a seasoned team including Sajid
Shaikh (CFO), Nitin Shewale (COO), K Ramesh (GM - Manufacturing), and Kedar Aphale (GM -
Operations), each boasting 25+ years of experience. With this wealth of experience and talent, the
company is well-equipped to achieve its ambitious goals.

SEBI Research Analyst Registration No : INH000009843 www.kamayakya.com

 RISKS

• VOEPL ventured into the low-margin ODU product, initially experiencing lower volume. However,
volume is projected to rise in FY24, FY25, and FY26, potentially impacting margins negatively. To
counter this, the launch of Water Dispensers and commercial refrigeration is anticipated to balance
the margins. Failure to expand these new products may result in a margin decline, subsequently
impacting the company's ROCE.

• VOEPL exclusively serves Voltas in the A/C segment, utilizing its entire capacity. This arrangement will
persist until Voltas provides adequate orders. However, any negotiation on product pricing or new
orders from Voltas might affect VOEPL's A/C business, expected to contribute ~45% to the overall
business by FY26. Yet, the current relationship with Voltas remains stable, showing no signs of
potential disruptions.

• VOEPL's primary products face seasonal demand between January and June. Adverse weather
conditions during this period can significantly affect the business, impacting both the working capital
cycle and profitability.

• All margin projections by VOEPL are contingent upon the assumption of continued benefits from the
PLI scheme, which enables ongoing investment in backward integration. Any delay or cancellation in
this scheme could potentially impact the company's margins.

SEBI Research Analyst Registration No : INH000009843 www.kamayakya.com

 PRICE DATA

Virtuoso Optoelectronics Ltd. Price Chart

350.00

300.00

250.00

200.00

150.00

100.00

50.00

0.00

Virtuoso Optoelectronics Ltd.

Source- Ace Equity, KamayaKya research

SEBI Research Analyst Registration No : INH000009843 www.kamayakya.com

 FINANCIALS

• PROFIT AND LOSS STATEMENT

(All figures are in Cr. unless mentioned otherwise)

P&L 2019 2020 2021 2022 2023

Net Sales 54.95 68.20 115.26 200.17 337.27
Total Expenditure 52.37 60.23 102.79 180.36 303.81
Gross Profit 4.59 14.57 22.89 36.13 59.05
GPM (%) 8.36 21.36 19.86 18.05 17.51
EBITDA 2.89 8.17 12.72 19.92 34.26
EBITDAM (%) 5.25 11.97 11.04 9.95 10.16
EBIT 2.56 6.73 10.37 14.79 24.83
EBITM (%) 4.65 9.87 9.00 7.39 7.36
PBT 0.90 1.92 2.90 5.73 11.29
PAT 0.54 1.41 2.08 3.94 7.77
PATM(%) 0.98 2.07 1.81 1.97 2.30

• FUND FLOW ANALYSIS

(All figures are in Cr. unless mentioned otherwise)

Sources of Funds 2019 2020 2021 2022 2023

Cash Profit 0.87 2.84 4.43 9.08 17.20

Equity Paid Up 1.50 1.66 1.66 14.98 22.84

Reserves & Surplus 3.00 9.58 11.66 6.28 70.81

Net Worth 4.50 11.24 13.32 21.26 93.65

Total Debt 16.66 38.53 51.43 68.00 88.15

Capital Employed 21.15 49.77 67.75 89.27 181.80

Application of Funds 2019 2020 2021 2022 2023

Gross Block 5.58 13.01 21.74 59.83 107.35

Investments 0.00 0.00 0.05 0.78 10.23

Cash and Bank
balance 0.56 0.05 0.02 0.81 0.33

Net Current Assets 5.59 6.33 11.56 -0.13 32.38

Total Current
Liabilities 14.91 30.68 40.89 73.79 138.68

Total Assets 26.35 57.19 79.90 125.56 276.50

Source- Ace Equity, KamayaKya research

SEBI Research Analyst Registration No : INH000009843 www.kamayakya.com

 • CASH FLOW STATEMENT
(All figures are in Cr. unless mentioned otherwise)

Cash Flow
2018 2019 2020 2021 2022

Cash Flow from

Operations 124.49 44.64 184.48 291.92 50.56
Cash Flow from
Investing activities -92.13 -33.55 -374.09 -186.63 -27.24
Cash Flow from
Finance activities -12.88 -5.22 222.55 -111.77 -51.45

Free Cash flow 114.29 2.85 -49.64 156.03 -7.09

• RATIO ANALYSIS

Financial ratios 2020 2021 2022 2023

Earnings Per Share (Rs) 8.47 12.52 2.63 3.40
Adjusted EPS (Rs.) 1.21 1.79 2.63 3.40
CEPS(Rs) 2.44 3.81 6.06 7.53
DPS(Rs) 0.00 0.00 0.00 0.00
Adj DPS(Rs) 0.00 0.00 0.00 0.00
Book Value (Rs) 67.54 80.06 14.19 41.01
Adjusted Book Value (Rs) 9.65 11.44 14.19 41.01
Tax Rate(%) 26.64 28.05 31.24 31.21
Dividend Pay Out Ratio(%) 0.00 0.00 0.00 0.00
GPM (%) 21.36 19.86 18.05 17.51
EBIDTM (%) 11.97 11.04 9.95 10.16
EBITM (%) 9.87 9.00 7.39 7.36
Pre Tax Margin(%) 2.82 2.51 2.86 3.35
PATM (%) 2.07 1.81 1.97 2.30
CPM(%) 4.16 3.85 4.53 5.10
ROA (%) 3.37 3.04 3.84 3.86
ROE (%) 17.91 16.96 22.78 13.52
ROCE (%) 18.99 17.65 18.83 18.32
Source- Ace Equity, KamayaKya research

SEBI Research Analyst Registration No : INH000009843 www.kamayakya.com

 Efficiency ratios 2020 2021 2022 2023

Asset Turnover(x) 1.63 1.68 1.95 1.68

Debtors Turnover(x) 4.39 7.55 20.37 19.21

Fixed Asset Turnover
(x) 7.34 6.63 4.91 4.03
Sales(x)/Working
Capital 10.77 9.97 -1561.41 10.42

Fixed Capital/Sales(x) 0.14 0.15 0.20 0.25

Receivable days 83.06 48.33 17.92 19.00

Cash conversion cycle 102.71 96.82 64.64 51.30

Growth Ratios 2020 2021 2022 2023

Net Sales Growth(%) 24.11 68.99 73.68 68.49

Core EBITDA
Growth(%) 182.92 55.81 56.59 71.96

EBIT Growth(%) 163.37 54.05 42.54 67.94

PAT Growth(%) 161.54 47.87 89.13 97.13

Adj. EPS Growth(%) 135.73 47.87 47.05 29.32

Liquidity ratio 2020 2021 2022 2023

Current Ratio(x) 1.21 1.28 1.00 1.23

Quick Ratio(x) 0.76 0.37 0.14 0.24

Solvency ratio 2020 2021 2022 2023

Total Debt/Equity(x) 3.43 3.86 3.20 0.94
Interest Cover(x) 1.40 1.39 1.63 1.83
Total Debt/Mcap(x) 0.00 0.00 0.00 0.23
Source- Ace Equity, KamayaKya research

SEBI Research Analyst Registration No : INH000009843 www.kamayakya.com

 Valuation ratios 2020 2021 2022 2023
Adjusted PE (x) 0.00 0.00 0.00 48.53
PCE(x) 0.00 0.00 0.00 21.92
Price / Book Value(x) 0.00 0.00 0.00 4.03
Dividend Yield(%) 0.00 0.00 0.00 0.00
EV/Net Sales(x) 0.59 0.46 0.41 1.38
EV/EBITDA(x) 4.92 4.17 4.12 13.57
EV/EBIT(x) 5.96 5.12 5.56 18.72
EV/CE(x) 0.70 0.66 0.65 1.68
M Cap / Sales 0.00 0.00 0.00 1.12
Source- Ace Equity, KamayaKya research

Cash Flow ratios 2020 2021 2022 2023

Cash Flow Per share -32.95 6.22 14.56 -4.21

Price to Cash Flow Ratio 0.00 0.00 0.00 -39.21

Free Cash Flow per Share -156.93 -105.82 -11.27 -33.87

Price to Free Cash Flow 0.00 0.00 0.00 -4.87

Free Cash Flow Yield 0.00 0.00 0.00 -0.21

Sales to cash flow ratios -12.44 111.37 9.18 -35.08

Du Pont analysis 2020 2021 2022 2023

PATM (%) 2.07 1.81 1.97 2.30
Sales / Total Assets(x) 1.63 1.68 1.95 1.68
Assets to Equity (x) 5.31 5.58 5.94 3.50
ROE (%) 17.91 16.96 22.78 13.52
Source- Ace Equity, KamayaKya research

SEBI Research Analyst Registration No : INH000009843 www.kamayakya.com

 FINANCIAL SHENANIGANS
Positive Negative

(All figures are in Cr. unless mentioned otherwise)

Year 2020 2021 2022 2023 CAGR Remark

Net Sales 68.20 115.26 200.17 337.27 70%
Trade receivables CAGR < Sales CAGR
Trade Receivables
19.75 10.77 8.88 26.24 10%
Little volatile since seasonality in
Trade Receivables as % of
the business but long-term range
sales
29% 9% 4% 8% should be stable

Contingent Liabilities 0.00 0.56 2.95 5.86

Equity 11.24 13.32 21.26 93.65
Contingent Liabilities as % of
Negligible
equity 0.00 0.04 0.14 0.06

Director's remuneration 0.12 0.30 0.30 0.30 36% Remuneration CAGR < PAT CAGR,
base effect impact otherwise on
PAT
1.41 2.08 3.94 7.77 77% declining trend.
Director's remuneration as %
of PAT 13% 21% 16% 14%

> 2 Shows highly leverage, high

Net debt/EBITDA 4.71 4.04 3.33 2.26 requirement of working capital

Conversion ratio is volatile due to

CFO/EBITDA
-67% 8% 109% -28% high requirement of working capital

Auditor fees 0.03 0.03 0.08 0.09

Auditor fees as % of sales 0.04% 0.03% 0.04% 0.03% Negligible
Source- Ace Equity, KamayaKya research

SEBI Research Analyst Registration No : INH000009843 www.kamayakya.com

 VALUATIONS

2021 2022 2023 2024E 2025E 2026E

P&L

Net Sales 115.26 200.17 337.27 550.00 750.00 1000.00

EBITDA 12.72 19.92 34.26 55.0 75.0 100.0

EBITDAM 11.04 9.95 10.16 10.0 10.0 10.0

PAT 2.08 3.94 7.77 12.38 16.88 22.50

PATM (%) 1.81 1.97 2.30 2.25 2.25 2.25

Dt-01/02/2024

Expected PAT 22.5

Expected P/E 52.7

Current M-cap 609.8

Expected M-cap 1030.5

Current price 267.0

Expected price 451.2

Upside 69%

SEBI Research Analyst Registration No : INH000009843 www.kamayakya.com

BIBLIOGRAPHY
• CMIE
• ACE Equity
• KamayaKya research
• VOEPL Annual reports since listing
• VOEPL Investor presentations since listing
• VOEPL Earning conference call transcripts since listing
• VOEPL Website
• VOEPL Notifications to NSE

SEBI Research Analyst Registration No : INH000009843 www.kamayakya.com

DISCLOSURES:
About the Company and the Business Activity:

Kamayakya Wealth Management Private Limited (CIN: U74999PN2021PTC205529) (“the Company”) is

incorporated on October 23, 2021 in Pune, Maharashtra.

The Company is registered as a Research Analyst under SEBI (Research Analyst) Regulations, 2014 vide SEBI
Reg. No. INH000009843 and engaged in the business of providing research analyst services, as well as in
other research activities including activities engaged in preparation and/or publication of research report
or research analysis or making “buy/sell/hold” recommendation on securities including options and
derivatives or giving price target or offering an opinion concerning public offer by companies and

The company does not provide investment banking or merchant banking or brokerage services.

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The Research Report is based on the facts, figures and information that are considered true, correct, and
reliable. The information is obtained from publicly available media or other sources believed to be reliable.
The report is prepared solely for informational purpose and does not constitute an offer document or
solicitation to buy or sell or subscribe for securities or other financial instruments for clients.

Details of associates:
• Currently there are no associates.

SEBI Research Analyst Registration No : INH000009843 www.kamayakya.com

Disclosures as Regulation 19 of the SEBI (Research Analyst) Regulations, 2014

Sr.No. Disclosure Yes/No

A Disclosures with regard to ownership and material conflicts of interest:
1 The Company or its research analysts, or his/her relative or associate has any direct NO
or indirect financial interest in the subject The Company.
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material conflict of interest at time of publication of the research report.
3 The Company or its research analysts, or his/her relative or associates have actual NO
ownership of 1% (one percent) or more securities of the subject The Company.
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1 The Company or its associates have received any compensation from the subject The NO
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2 The Company or its associates have managed or co-managed public offering of NO
securities for the subject in the past twelve months.
3 The Company or its associates have received any compensation or other benefits from NO
the subject The Company or third party in connection with the research report
C Other Disclosures:
1 The research analyst has served as an officer, director, employee of the subject The NO
Company
2 The Company or its research analyst has been engaged in market making activity for NO
the subject The Company.
Subject company means to the company on which the recommendation is given and the research report is issued.

Definitions of Terms Used:

TERM DEFINITION

BUY Expected absolute returns of more than 20% over a specified time period.
Expected absolute returns between 20% and -15% over a specified time
HOLD period.

SELL Expected absolute returns of less than -15% over a specified time period.

ENTRY PRICE Price at which the stock was recommended.

TARGET PRICE Expected price of the stock at the end of a specified time period.
POTENTIAL
UPSIDE Expected absolute returns from entry price over a specific time period.

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SEBI Research Analyst Registration No : INH000009843 www.kamayakya.com

Disclaimers:

This Research Report (hereinafter called report) has been prepared and presented by Kamayakya Wealth
Management Private Limited, which does not constitute any offer or advice to sell or does solicitation to
buy any securities. The information presented in this report, are for the intended recipients only. Further,
the intended recipients are advised to exercise restraint in placing any dependence on this report, as the
sender, Kamayakya Wealth Management Private Limited, neither guarantees the accuracy of any
information contained herein nor assumes any responsibility in relation to losses arising from the errors
of fact, opinion or the dependence placed on the same.

Despite the information in this document has been previewed on the basis of publicly available
information, internal data, personal views of the research analyst(s)and other reliable sources, believed to
be true, we do not represent it as accurate, complete or exhaustive.

It should not be relied on as such, as this document is for general guidance only. Besides this, the research
analyst(s) are bound by stringent internal regulations and legal and statutory requirements of the
Securities and Exchange Board of India (SEBI) and the analysts' compensation was, is, or will be not directly
or indirectly related with the other companies and/or entities of and have no bearing whatsoever on any
recommendation, that they have given in the research report. Kamayakya Wealth Management Private
Limited or any of its affiliates/group companies shall not be in any way responsible for any such loss or
damage that may arise to any person from any inadvertent error in the information contained in this
report. Kamayakya Wealth Management Private Limited has not independently verified all the information,
which has been obtained by the company for analysis purpose, from publicly available media or other
sources believed to be reliable. Accordingly, we neither testify nor make any representation or warranty,
express or implied, of the accuracy, contents or data contained within this document.

We hereby declare that the information herein may change any time due to the volatile market conditions,
therefore, it is advised to use own discretion and judgment while entering into any transactions,
whatsoever. Individuals employed as research analyst by Kamayakya Wealth Management Private Limited
or their associates are not allowed to deal or trade in securities, within thirty days before and five days
after the publication of a research report as prescribed under SEBI Research Analyst Regulations. Subject
to the restrictions mentioned in above paragraph, we and our affiliates, officers, directors, employees, and
their relative may: (a) from time to time, have long or short positions acting as a principal in, and buy or
sell the securities or derivatives thereof, of Company mentioned herein or (b) be engaged in any other
transaction involving such securities and earn profits.

Compliance Officer:

Aniket Kulkarni

E-mail Address: [email protected]

Phone Number: +91-9175939641

SEBI Research Analyst Registration No : INH000009843 www.kamayakya.com

 [email protected]

www.kamayakya.com

SEBI Research Analyst Registration No : INH000009843 www.kamayakya.com