Note: This is a re-post. Here is the big report. I have already invested in this company back is August. Here is the LINK
Electronics industry is one of the fastest growing manufacturing industries in the world. The demand in expected to reach USD 500 Billion by year 2020. The electronic industry in India constitutes just 0.17 % of the global electronic industry. Hence it is miniscule by international comparison. However the demand in the Indian market is growing rapidly and investments are flowing in to augment manufacturing capacity.
Salzer Electronics is a Coimbatore-based market leader in rotary switches, with more than 40% market share in India. It is also the largest producer of cable ducts in the country. It manufactures single phase transformers and switch gears along with isolators and panel accessories that are purchased by many blue chip companies, including Railways and Nuclear Power Corporation. The products are also exported to more than 30 countries and to world leaders like General Electric and Schneider Electric. The company has four manufacturing facilities and has a marketing and distribution agreement with Larsen and Toubro, which holds a 30% equity stake in Salzer. The recent success of the company in energy saving street lighting and wireless meter reading systems in southern India can be a game changer for it.
Larsen and Turbro (L&T) is the single largest shareholder of the company with a 26% stake and two directors on SEL’s board. SEL has a marketing tie-up with L&T and derives around 40% of its total revenues through the L&T channel. The other big clients of the company include General Electric and Schneider Electric. In the switchgear segments, exports constitute around 41% of the company’s revenues. With a gradual revival in the domestic capital expenditure (capex) cycle in the key industries and an improvement in the project spending, the management expects a strong growth in the company’s earnings in the next two to three years. The company has bagged a prestigious order worth Rs106 crore from the state government of Tamil Nadu under the Integrated Urban Development Scheme for executing energy efficient projects under the public-private partnership model and expects more deals in the coming year. Overall, the management is quite optimistic of delivering over 20% CAGR in the top line in the next two years.
After a stagnant net income growth over FY2012-14, SEL is well poised to deliver a CAGR of around 50% in the earnings over FY2014-16.The stock trades at 10.6x and 7x FY2015 and FY2016 estimates respectively based on our quick earnings estimates. On a cash earnings basis, the stock trades at 6.6x and 5x FY2015 and FY2016 estimated earnings. SEL is a consistent dividend paying company with a pay-out of around 20% (the company maintained the pay-out ratio even when its earnings growth was muted). The current Debt to equity for the quarter is at 0.14. Given the significant improvement in the earnings and the fact that L&T is its largest shareholder and marketing partner, we believe SEL deserves a better valuation multiple. I expect a 25-30% potential upside to the stock price in the next six months.
CRISIL recent rating is A2+ which clearly indicates the soundness of the company fundamentals which are likely to improve further.
Note: This has already gone up a lot in the last few days. New investors be cautious at current levels.
Electronics industry is one of the fastest growing manufacturing industries in the world. The demand in expected to reach USD 500 Billion by year 2020. The electronic industry in India constitutes just 0.17 % of the global electronic industry. Hence it is miniscule by international comparison. However the demand in the Indian market is growing rapidly and investments are flowing in to augment manufacturing capacity.
Salzer Electronics is a Coimbatore-based market leader in rotary switches, with more than 40% market share in India. It is also the largest producer of cable ducts in the country. It manufactures single phase transformers and switch gears along with isolators and panel accessories that are purchased by many blue chip companies, including Railways and Nuclear Power Corporation. The products are also exported to more than 30 countries and to world leaders like General Electric and Schneider Electric. The company has four manufacturing facilities and has a marketing and distribution agreement with Larsen and Toubro, which holds a 30% equity stake in Salzer. The recent success of the company in energy saving street lighting and wireless meter reading systems in southern India can be a game changer for it.
Larsen and Turbro (L&T) is the single largest shareholder of the company with a 26% stake and two directors on SEL’s board. SEL has a marketing tie-up with L&T and derives around 40% of its total revenues through the L&T channel. The other big clients of the company include General Electric and Schneider Electric. In the switchgear segments, exports constitute around 41% of the company’s revenues. With a gradual revival in the domestic capital expenditure (capex) cycle in the key industries and an improvement in the project spending, the management expects a strong growth in the company’s earnings in the next two to three years. The company has bagged a prestigious order worth Rs106 crore from the state government of Tamil Nadu under the Integrated Urban Development Scheme for executing energy efficient projects under the public-private partnership model and expects more deals in the coming year. Overall, the management is quite optimistic of delivering over 20% CAGR in the top line in the next two years.
After a stagnant net income growth over FY2012-14, SEL is well poised to deliver a CAGR of around 50% in the earnings over FY2014-16.The stock trades at 10.6x and 7x FY2015 and FY2016 estimates respectively based on our quick earnings estimates. On a cash earnings basis, the stock trades at 6.6x and 5x FY2015 and FY2016 estimated earnings. SEL is a consistent dividend paying company with a pay-out of around 20% (the company maintained the pay-out ratio even when its earnings growth was muted). The current Debt to equity for the quarter is at 0.14. Given the significant improvement in the earnings and the fact that L&T is its largest shareholder and marketing partner, we believe SEL deserves a better valuation multiple. I expect a 25-30% potential upside to the stock price in the next six months.
CRISIL recent rating is A2+ which clearly indicates the soundness of the company fundamentals which are likely to improve further.
Note: This has already gone up a lot in the last few days. New investors be cautious at current levels.
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4 comments:
Thanks for the new multibagger pls post the second one.
Ive just finished my research on it, once i get time i will write a report on it. Either tomorrow or day after.
Is it correct time to enter into this scrip ?
Yes It is the correct name, It only BSE.
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