Saturday, December 20, 2014
Salzer Electronics is a Coimbatore based company established in 1985 with technical collaboration of Saelzer Schaltgerate Fabrik, GmbH., Germany. Company manufacturing various products finding applications in transmission and control of power. Its product list includes Rotary Switches, Terminal Connectors,Relays,Motor Control Products, cable Ducts,Energy Savers, Toroidal Transformers, Modular Switches..etc. Company having five manufacturing facilities – four in Tamilnadu and one in Himachal Pradesh .India’s largest infrastructure conglomerate Larsen & Toubro is the single largest share holder in this company with more than 26 % stake in it. In addition to the financial interest in Salzer , L&T supporting to market the products of Salzer and close to 35 % of total sales of Salzer is coming through L&T.Salzer is the largest producer of Rotary switches in Asia and market leader in India. Company is the only approved supplier of Rotary Switches to Nuclear Power corporation of India and the largest supplier to Indian Railways.Company is a preferred supplier for GE India and Schneider Electric.
Demand for company’s products are mainly linked with the growth of power and infrastructure sectors which reported slow pace in past few years. Even during this period Salzer could continuously increase its top line as well as export income. Company now concentrating in power saving solutions for Corporations and Municipalities.After successful completion of such projects in Coimbatore and Madurai municipalities company now received an order worth Rs.106 Cr for implementing similar project at Erode and surrounding areas.Company now planning to increase its attention in premium products like Modular Switches..etc . In order to increase its presence in overseas countries , recently Salzer formed an overseas marketing company named Salzer Global Services, LLC in USA . With a strong supporter like L&T , Salzer is in a better position to utilize emerging opportunities once there is revival in infrastructure and power sectors.Salzer is the largest supplier of Rotary Switches to Indian Railways too . For the past few years sourcing from Railway came down due to their poor financial health, but the new government’s initiatives to revive Railway is also expected to benefit Salzer in a big way . On expectation of revival of demand from such major customers , company management is confident to achieve 20 % CAGR for next few years .Recently company insiders also bought shares from open market even above Rs.200 ( Disclosure Link HERE) which may take an indication of increasing confidence .
In last FY , company reported a turnover of Rs.245 Cr and a net profit of Rs.8.5 Cr . In this FY , Company already reported a net profit close to Rs.6.5 Cr in the first half itself and expected to close the year with 13-14 Cr NP if there is revival in economy .
With the strong support of L&T and possible revival in its user industries , company is expected to report decent growth going forward . Order flow to project division in the field of energy management under PPP model is also expecting to increase and recent order of Rs.106 Cr in an indication for the potential of this business. When I initiated this exercise ,Stock price of Salzer was around Rs.150 , but it gained more than 80 % in last one week.I believe, the ‘Value’ factor missing at this price after the sharp run up in such a short period and hence not suggesting any aggressive buy at current rate for new entrants . Considering its future potential, those entered at lower level can still hold it for long term, and new buyers can consider fresh buy in corrections , if any .
Link to Company website HERE
Posted by VALUEPICK at 6:26 AM