Salzer Electronics hosted a conference call on Aug 8, 2023. In the conference call the company was represented by Rajesh Doraiswamy, Joint Managing Director.

Key takeaways of the call

Growth in Q1Fy24 was mainly driven by the higher margin switchgear business that led to margin improvement.

Contribution from Exports at 22.55%, export revenue grew 37.9% YoY in Q1 FY24, driven by higher sales from North and South America, Europe and Asian countries.  Expect to continue with a similar growth trajectory with its strong product offerings and brand position in the market. Developed new customers and new products for NA market and that have facilitated growth in NA market in Q1FY24.

Based on domestic and export outlook, the company is cautiously optimistic about the overall business performance.

The company expects a revenue growth of about 20-25% for FY24. EBITDA margin 100-150 bps compared to last FY23 due to better realization in IS and better revenue mix.  Confident of crossing 4% PAT margin for current fiscal.

Last fiscal the company grew by 30%. But the growth moderated in Q1FY24.  There is lot of growth opportunities but there are also lots of global headwinds. Provided there are no global headwinds the company will do better growth.

Cables & Wires business faces the challenge of pricing and competition.  For FY24, the revenue of C&W business is expected to grow at 18-20% from FY23 level is expected for C&W is expected. EBITDA margin of C&W that was used to be about 7.5-8% has dropped to 6.5-7% now. So the focus is to bring the EBITDA  margin back to 7.5%-8% by this fiscal end.  

Global switchgear market is expected to grow at a CAGR at 5.5% to USD 145 billion  during 2023-2031 and Indian market is expected to register a growth of 7.7% CAGR for the same period.

Over the last 3 quarter price were increased multiple time and RM cost has come down. With RM cost declining further  will lead to further margin expansion.

Capacity utilization of enamel wires stands at about 80% and the sales of this product is expected to grow at about 5% going forward.    

Looking into opportunity in smart meter business and will update in 2-3 quarters if there is any development.

Electric charger are in final stage of testing at ARAI. Testing should be completed by this quarter and revenue to start flow from Q3FY24. The company is focused on fast chargers largely find usage in highways aiming to charge a car in 30 minutes.

Industrial Switchgear segment growth was driven largely by transformers 3 phase, rotary switches and wire harness.

Capacity utilization (at plant level) is in the range of about 60-80%. 

Receivables as end of Q1FY24 is at Rs 287 crore or at about 90 days. Debt – expect to maintain borrowings at this level for FY24 due to WC requirement.

No single customer not giving more 10% of revenue top 20 customers giving about 45% of revenue.

Renewable industry contributes about 15-19% of the revenue for the company and this segment growth is at faster rate.